Yes — funding can sit behind a bank. A caveat loan or a registered second mortgage ranks below your bank’s first mortgage on the same property, which lets a company or trust release equity for business purposes without refinancing the senior loan or disturbing the rate on it.
What “behind a bank” actually means
When two facilities are secured against the same property, they rank in the order they sit on title. The bank’s first mortgage holds first position; a facility behind it ranks second. If the property is ever sold, the bank is repaid in full first, and the second-ranking facility is repaid from whatever equity remains. That order — not the size of the loan — is why funding behind a bank is priced above a senior bank rate: recovery is harder and the senior holds priority. The appeal for a borrower is straightforward. You raise capital against equity you already hold, without refinancing or renegotiating a first facility that may be on terms worth keeping.
Does the bank have to agree?
It depends on the instrument and the state. For a registered second mortgage the position has shifted in recent years: in Queensland, and in New South Wales since October 2021, registration no longer legally requires the first mortgagee’s consent. In practice, though, most bank mortgages contractually prohibit the borrower from granting a further mortgage without consent, so the bank’s agreement is still usually sought. Where a bank consents, it typically does so on a short deed of priority and a modest fee, and most banks will consent on sound commercial security — though some turn it around faster than others. A caveat is different again: it can generally be lodged without the bank’s consent, which is part of why it moves quickly.
What a deed of priority does
A deed of priority — sometimes called a deed of postponement — is the agreement between the bank and the second-ranking holder that fixes the order of priority and caps the amount the bank ranks ahead for. It matters for two reasons. First, it confirms the bank’s priority is limited to a stated sum rather than an open-ended “all monies” figure, so the equity behind it is defined. Second, it protects the second-ranking facility against tacking — the rule that further advances a bank makes, before it has notice of the second facility, can rank ahead of it. For the borrower it is usually a short, standard document; for the funding sitting behind the bank, it is the difference between a clean position and an exposed one.
Caveat or second mortgage — which sits behind the bank?
Both can sit behind a bank; they trade speed against strength. A caveat is the lighter instrument — it records an interest on title without registering a mortgage, can usually be lodged without the bank’s consent, and suits shorter facilities measured in weeks to a few months. A registered second mortgage is the stronger instrument — it carries a registered mortgagee’s enforcement rights and a clearer ranking on title — but it moves at the speed of the bank’s consent and suits larger or slightly longer needs. The choice comes down to how fast you need the money, how long you need it for, and how much you are raising.
How combined LVR works behind a bank
Because both facilities are secured against the same property, the figure that matters is the combined loan-to-value ratio: the bank’s balance plus the second-ranking facility, measured against the property’s value. A second mortgage commonly reaches up to around 75% combined LVR on suitable security, subject to assessment. The headroom you have is the gap between what the bank is owed and that ceiling. If your bank loan already sits near the top of the range, there is little equity to release behind it; if it sits well below, there is room to work with.
How long it takes
A caveat-based facility can settle in days once the security and a clear exit are confirmed. A registered second mortgage typically runs a little longer — often one to two weeks — and the single biggest swing factor is how quickly the bank turns around its consent and the deed of priority. Confirming the bank’s consent posture early is the highest-leverage step in the whole process. Across both routes the constants are the same: a credible exit, an honest combined-LVR position, and security the funding can rank against.
FAQ
Does my bank have to consent to a loan behind its mortgage?
It depends on the state and the instrument. In Queensland, and in NSW since October 2021, registering a second mortgage no longer legally requires the first mortgagee's consent, but most bank mortgages still require it contractually, so consent is usually sought. A caveat can generally be lodged without the bank's consent.
What is a deed of priority?
It is a short agreement between the bank and the second-ranking holder that fixes the order of priority and caps the amount the bank ranks ahead for, protecting the facility behind it against the bank's later advances.
Will a loan behind my bank affect my existing facility?
No. A second-ranking facility sits behind your bank loan without refinancing it or changing its rate, which is the main reason borrowers use one rather than refinancing the senior debt.
How much can I raise behind a bank?
It comes down to combined LVR — your bank balance plus the new facility, measured against the property value. Second mortgages commonly reach up to around 75% combined on suitable security, subject to assessment.