Private Loans to Stop a Mortgagee Sale: What Is Realistic and What Is Not

Key takeaways

• The figure to refinance is the payout, not the balance: arrears, default interest and enforcement costs are added.
• Private lenders lend on a cautious valuation and cap the LVR (often around 65% to 70% for this kind of loan, indicative), so thin equity usually means no.
• In the example, a $753,000 payout needs an $825,000 private loan once fees and six months' prepaid interest are added.
• The private loan needs its own exit: a sale on your terms, a bank refinance later, or business recovery with evidence.
• Hardship options come first. Ask your lender in writing, and call the National Debt Helpline on 1800 007 007 to reach a financial counsellor.
• Once the mortgagee has exchanged contracts on a sale, a refinance generally cannot stop it.

How does a lender get from missed payments to a mortgagee sale?

The steps differ by state, by lender and by whether the loan is regulated consumer credit or a business loan, but the general sequence is similar:

For regulated consumer loans, the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 sets requirements for default notices before a lender can enforce. For business loans, the mortgage terms and state property law govern the notices. Either way, at each stage the payout figure grows and the time available shrinks. A refinance that is workable at the arrears stage can be impossible after a possession order, simply because the arithmetic no longer works. This is general information; get legal advice on any notice you receive.

What should you try before a private loan?

A private refinance is expensive, so ask your current lender for help first. For regulated credit, Moneysmart explains how to ask for help in financial hardship: the lender must consider your request and give reasons if it refuses. Options can include a pause, reduced repayments, a longer term or a period of interest-only. Business loans are not covered by the same statutory hardship rules, but many lenders have hardship and small business support processes, and banks that subscribe to the Banking Code of Practice make commitments to customers in financial difficulty.

Speak to a financial counsellor before you sign anything new. The National Debt Helpline on 1800 007 007 can connect you with one, and Moneysmart's financial counselling page explains what they do, including negotiating with creditors on your behalf. Business owners can ask for a small business financial counsellor. Read your rights in financial hardship and where to get financial counselling in Australia.

What decides whether a private refinance is realistic?

Two things: equity and exit. The private lender is being asked to repay a lender that is already enforcing. It will do that only if the property covers the new loan comfortably on a cautious valuation, and if it can see how its own loan will be repaid.

Start with the payout figure, which the current lender or its solicitor can provide. For illustration:

• Loan balance: $700,000
• Arrears of interest: $30,000
• Default interest: $8,000
• Enforcement costs to date: $15,000
• Payout figure: $753,000

The private loan has to cover the payout and its own costs. Assume an example establishment fee of 2%, six months' interest prepaid at an example 12% a year (6% of the loan) and $6,000 of legal and valuation costs. The gross loan needed is ($753,000 + $6,000) / (1 - 0.02 - 0.06) = $825,000.

Case A is common. On that property alone a refinance is not realistic, and the options are a controlled sale, more security from another property, or a negotiated arrangement with the current lender.

What does it cost: default interest, enforcement costs and the private loan?

Three layers of cost build up at once:

• Default interest: many loan contracts add a margin to the rate while the loan is in default, at an amount the contract sets.
• Enforcement costs: the lender's legal fees, valuation, possession costs, agent, marketing and holding costs, usually added to the debt.
• The private loan itself: in the example, a $16,500 establishment fee, $49,500 of prepaid interest and $6,000 of costs, $72,000 for six months.

Whether $72,000 is worth paying depends on what it protects. For illustration, continue Case B. If the owner uses the six months to sell on their own terms for $1,400,000 less 2.5% selling costs ($1,365,000), repaying $825,000 leaves $540,000. If instead the mortgagee sells for $1,250,000, with $60,000 of sale costs and a payout grown to $780,000, the owner receives $410,000. In that example the controlled sale leaves the owner $130,000 better off, with the $72,000 cost of the private loan already inside the $825,000 repaid.

The comparison holds only if the owner's own sale really achieves more. A mortgagee selling has legal duties about the price it accepts, and some mortgagee sales reach full market value; the difference is that it sells on its timetable. What a mortgagee sale actually costs looks at this in detail.

What exit will a private lender want to see?

• A sale on your terms: an agency agreement, an appraisal and a realistic price. This is the most common exit and the one lenders rely on most.
• A bank refinance once the arrears are behind you: possible, but a bank will see the arrears and any default in your credit reporting (CreditSmart explains what a credit report shows), and most want a period of clean repayments first.
• Business recovery: only with evidence, such as signed contracts, receivables or a turnaround already visible in management accounts.
• Other assets: the sale of another property, shares or a business.

An exit that depends on the same income that has just failed to meet the bank's repayments is not an exit. If a private loan fails as well, the second enforcement, by a lender with shorter terms and higher default rates, is usually more expensive than the first; see what happens if you default on a private loan.

What is not realistic?

• Refinancing when the payout and costs come to well over about 70% of a cautious valuation (indicative).
• Stopping a sale after the mortgagee has exchanged contracts with a buyer.
• A private loan over your home to cover personal debts. That is regulated consumer credit, which many private lenders do not offer, and anyone suggesting you "call it business purpose" to get around the rules is a warning sign.
• Paying an upfront fee to someone who promises a loan regardless of your position. Check the business, and any credit licence it claims, on ASIC's registers.
• Expecting a refinance to settle in a few days. Payout figures, a valuation, a credit decision and two sets of solicitors all take time, which is another reason to act at the arrears stage.

How does a private refinance actually happen?

1. Ask the current lender or its solicitor for a written payout figure with a daily rate for each extra day.
2. Give the private lender the payout figure, any default notice, the property details and evidence of your exit.
3. The lender orders its own valuation and makes a credit decision on equity and exit.
4. If it agrees to lend, you receive a formal offer showing the gross loan, every deduction and the net amount.
5. Both lenders' solicitors book settlement: the new lender pays the payout, the old mortgage is discharged and the new one registered.
6. You use the time you have paid for to carry out the exit.

Model the term, prepaid interest and fees before you commit with the bridging finance calculator. Private pricing is set lender by lender, but the bank refinance you may be aiming for later depends on the rate environment: the RBA's cash rate target was 4.60% from 30 September 2026, so check the current figure when you test that exit.

What should you do this week?

1. Read every notice you have received and note the dates.
2. Ask your lender in writing about hardship options or a repayment arrangement.
3. Call a financial counsellor.
4. Get the payout figure and an honest view of value from recent comparable sales.
5. Do the arithmetic in this post: payout plus costs against about 70% of a cautious valuation.
6. If it works, decide on the exit before you look for a lender.

If the numbers and the exit stand up, post one private loan request on ADS with the payout figure, the valuation evidence and your exit, and 200+ verified lenders and brokers can ask about it.

Frequently asked questions

Can a private loan stop a mortgagee sale?

It can if it repays the full payout figure before the mortgagee exchanges contracts on a sale, and if the property has enough equity on a cautious valuation for the new lender. In practice that means total borrowing within around 65% to 70% of value (indicative) and a credible plan to repay the private loan within months.

What is a payout figure?

It is the total needed to discharge the loan on a given date: the balance, arrears, default interest, fees and the lender's enforcement costs so far, usually with a daily rate for each extra day. Ask the lender or its solicitor for it in writing. It is the number a refinance has to cover, and it is usually well above the balance on your last statement.

Can I still sell the property myself if I am in default?

Often yes, until the lender takes possession or exchanges contracts on its own sale, but you will need the lender's cooperation and the sale has to repay the payout figure. Many lenders prefer an owner's sale at a realistic price to enforcing. Speak to the lender and a solicitor early.

Where can I get help if I cannot make my loan repayments?

Contact your lender and ask about hardship options in writing. For confidential help, call the National Debt Helpline on 1800 007 007 to speak with a financial counsellor, who can explain your options and negotiate with the lender for you. Business owners can also ask about small business financial counselling.

How much does a private loan to stop a sale cost?

It depends on the lender, the LVR and the term. In the illustrative example, an $825,000 loan for six months with a 2% establishment fee, six months' prepaid interest at 12% and $6,000 of costs comes to $72,000. Those costs come out of the advance, so the loan has to be larger than the payout figure.

Will a bank refinance me after I clear the arrears?

Possibly, but rarely straight away. Lenders will see the arrears, any default and hardship arrangements in your credit reporting, and most want a period of clean repayment history first. Plan the private loan term around a sale or another dated exit, and treat a bank refinance as a later step.

Related reading

• Selling Under Pressure: What a Mortgagee Sale Actually Costs
• Financial Hardship: Your Rights Before You Miss a Payment
• What Happens If You Default on a Private Loan?

Sources

• National Consumer Credit Protection Act 2009 (National Credit Code, Schedule 1) — Federal Register of Legislation
• Financial hardship — ASIC Moneysmart
• Financial counselling — ASIC Moneysmart
• Search ASIC registers — Australian Securities and Investments Commission
• Cash rate target — Reserve Bank of Australia
• Banking Code of Practice — Australian Banking Association
• CreditSmart: credit reports — CreditSmart (ARCA)