Why Knote believes second mortgages need a reset

When Aman Singh looked at Australia's second mortgage market five or six years ago, he saw an industry crying out for standardisation.

First mortgage products had been refined and systematised over decades, but second mortgages remained fragmented, slow, and poorly understood – even by many of the brokers and clients who needed them most.

So Singh (pictured, left, alongside Knote chief finance officer Kamal Bagga) set out to change the game with Knote.

"Banks were too formal and serviceability-based, and there was no need of refinancing every time – which was what 80% of the people were doing, just refinancing every time they wanted to use their equity for business purposes,” recalls Singh. “I thought that was just playing in the hands of bigger banks.”

Singh launched Knote as a non-bank commercial lender before expanding it into a nationwide specialist second mortgage and gap funding provider three years ago.

The business operates exclusively in the commercial-lending space, focusing on borrowers – predominantly property investors, developers, and business owners – who have clear equity in their property and a defined exit strategy.

Knote secures against residential and commercial properties in metro areas (Melbourne, Sydney, Queensland) and satellite towns with a 10,000-plus population, although with different LVRs for non-metro locations.

The group seeks to differentiate itself through speed.

Traditional second mortgage providers often take four to eight weeks to make a decision and fund a deal. Knote has cut that timeline down significantly, using desktop valuations, streamlined documentation, and an internally built CRM system that Singh developed using AI tools and more than 20 years of finance industry experience.

"The clients we are dealing with are time-to-money clients,” says Singh. “Our proposition is funding within 24 to 48 hours… We have designed a system where we take a decision very quickly. The second mortgages can be launched within hours, not days or weeks or four weeks to do so."

Knote's products include 12-month second mortgages, gap funding aligned to settlement dates, and equity release products. Most have interest capitalised, meaning clients make no repayments during the loan term.

Read more: Fortune favours the speed freaks in commercial and asset broking

There is also no minimum loan period: a client can draw funds for a single day and repay with only per-day interest charged, covered by upfront establishment fees.

"All the private lenders or any other facility providers in second mortgages will give you minimum terms because they want to make minimum money out of it. We do not have a minimum term. You can use the money for one day,” explains Singh.

This feature was designed to encourage repeat usage and build long-term relationships rather than one-off transactions.

"We want to be there for the people or businesses whenever they need us, frequently when they need us,” says Singh. “We believe in having a customer loyal to us rather than making the most out of one customer. How many second mortgage providers do you go back to again and again? You never do – because these private lenders are used once, never in their life. We don't want to be that."

The strategy appears to be working.

Knote is currently processing $20 million in applications monthly, with approximately $10 million in approvals or drawdowns, and is recording double-digit growth month on month. 

Operating from Melbourne, Victoria with a team of eight, Singh's ambition is to educate the Australian market about second mortgages and, in doing so, redefine what the space can look like.

He says: "The three problems that we were trying to solve when we started the business was time to money, educating people in second mortgages, and creating an SLVR environment which is very simple, easy to follow, and then not needing to refinance – and having a structured serviceability or an exit strategy structure where you could fund these business or commercial uses of the equity which are clearly available."

A bespoke approach to LVR

Central to Knote's model is a proprietary risk assessment tool Singh developed specifically for the second mortgage space: the Structured Loan to Value Ratio, or SLVR.

Standard LVR works well enough for first mortgage lending, where a single lender holds priority claim over a property and recovery is relatively straightforward. But in a second mortgage scenario, that simplicity breaks down. The first lender is repaid before anyone else, recovery timelines are longer, and the overall risk exposure is materially higher. A standard LVR calculation, Knote argues, does not adequately reflect that reality.

SLVR addresses this by applying a structured buffer to the first mortgage balance when calculating total lending exposure. Rather than simply comparing the proposed loan against the property's value, it factors in real-world recovery considerations – the costs of enforcement, potential delays, and the priority position of the first mortgagee – to arrive at a more honest picture of available equity.

In practice, this means Knote can lend up to 80% LVR on a second mortgage basis while still maintaining what Singh describes as a “disciplined, conservative approach to risk”.

By building a framework that prices second mortgage risk accurately from the outset, the company believes it can move faster than competitors without taking on disproportionate exposure.