Secured Lending Glossary: Caveats, LVR and Bridging Terms

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Bridging finance: The general name for short-term lending that 'bridges' a timing gap. In business lending it is almost always secured by property.
Bridging loan: A short-term loan that covers the gap between needing money now and receiving it later, usually from a property sale or a refinance. It is repaid in one amount when that event happens. Read more.
Capitalised interest: Interest that is added to the loan balance instead of being paid monthly. It is repaid with the principal at the end of the term.
Caveat: A notice lodged on a property title warning that someone claims an interest in the land. Once lodged, it generally stops the title being dealt with until the caveator is dealt with. Read more.
Caveat loan: A short-term loan where the lender protects its position by lodging a caveat on the borrower's property title rather than registering a mortgage. It is quick to put in place and suits short terms.
Caveator: The person or business that lodges a caveat. In a caveat loan, the lender is the caveator.
Certificate of title: The official record of a property's ownership and registered interests. A title search shows owners, mortgages, caveats and other dealings.
Consent to second mortgage: Permission from the first mortgagee for a second mortgage to be registered. Some first mortgage contracts require it; others only require notice.
Cross-collateralisation: Using more than one property to secure a single loan, or one property to secure several loans.
Deed of priority: An agreement between two secured lenders setting out the order and limits of their claims, sometimes required when a second mortgage is registered behind a bank.
Default: Failing to meet a loan obligation, such as not repaying by the end of the term. Default terms are set out in the loan agreement.
Default interest: A higher interest charge that applies only while a loan is in default. Check how and when it applies before signing.
Deposit bond: A guarantee used instead of a cash deposit on exchange of contracts, repaid in full at settlement.
Development approval (DA): Council permission to develop or change the use of land. An approved DA often lifts the value of a site.
Director penalty notice (DPN): An ATO notice that makes directors personally liable for certain unpaid company tax debts, such as PAYG withholding and super guarantee. Read more.
Discharge: Removing a mortgage or caveat from the title once the loan is repaid. A discharge of mortgage form is lodged with the land titles office.
End debt: The debt left after the exit event, such as the remaining loan after a property sale reduces the balance.
Equitable mortgage: A mortgage that is effective between the parties but not registered on title, usually protected by a caveat.
Equity: The value of a property minus the debts secured against it. Usable equity is the portion a lender will lend against after applying its maximum LVR.
Establishment fee: A one-off fee charged when a loan is set up. It is usually deducted from the loan advance at settlement.
Exit strategy: How a short-term loan will be repaid: a sale, a refinance, an incoming payment or a combination. Lenders assess it as carefully as the security. Read more.
First mortgage: The primary registered mortgage over a property. The first mortgagee is repaid first from any sale proceeds. Read more.
Garnishee notice: An ATO notice requiring a third party, such as a bank or customer, to pay money owed to you directly to the ATO. Read more.
Going concern: A sale of a business or tenanted property as an operating enterprise, which can be GST-free if the ATO's conditions are met.
GST on commercial property: Goods and services tax that may apply to the sale of commercial property, unless the sale qualifies as a going concern or another exemption applies.
Guarantor: A person or company that promises to repay a loan if the borrower cannot. Directors commonly guarantee company loans.
Independent legal advice: Advice from your own solicitor on the loan documents, often required where a guarantor or third-party security provider is involved.
Indicative terms: An early written outline of the loan offered, subject to conditions. It lets you compare costs before committing.
Interest-only: A loan where only interest is paid during the term and the principal is repaid at the end.
Land banking: Holding land for future development or rezoning. Lenders treat vacant land conservatively because it earns no income.
Lapsing notice: A notice that can be issued to a caveator in some states requiring them to take steps to protect their claim within a set time, otherwise the caveat lapses. Rules differ by state.
Leasehold: A long-term right to occupy land owned by someone else. Most land in the Australian Capital Territory is held on Crown leasehold.
Letter of offer: The formal offer of finance that, once accepted, leads to loan documents being prepared.
Loan agreement: The contract setting out the amount, term, interest, fees, security and obligations of a loan.
Low doc loan: A loan approved with less financial documentation than a standard bank loan, typically leaning on security and the exit instead. Read more.
LVR (loan-to-value ratio): Total secured debt divided by the property value, shown as a percentage. For a second mortgage, the first mortgage balance is included in the calculation. Read more.
Mortgagee: The lender who holds the mortgage. The borrower who grants the mortgage is the mortgagor.
Mortgagee in possession: A lender that has taken possession of a mortgaged property after default, usually to sell it and recover the debt.
Mortgagor: The property owner who grants a mortgage over their property as security for a loan.
Non-bank lender: Any lender that is not an authorised deposit-taking institution. Non-banks set their own credit policy, which often suits complex deals.
Off the plan: Buying a property before it is built, with settlement due on completion. Valuation shortfalls at completion often create a funding gap.
Peak debt: The highest total amount owed during a bridging loan, usually including capitalised interest and fees, before the exit repays it.
PEXA: The electronic platform most Australian property settlements and mortgage registrations now run through, linking lenders, conveyancers and land registries.
Prepaid interest: Interest for some or all of the term that is deducted or paid upfront at settlement, so no monthly payments are due during the term.
Priority: The order in which secured lenders are repaid. A first mortgage has priority over a second mortgage, which has priority over later interests.
Private lender: A non-bank lender that funds loans from private or wholesale capital rather than customer deposits. Read more.
Refinance: Replacing an existing loan with a new one. When the new lender settles, it repays the loan and the old security is discharged. Read more.
Registered security: A mortgage or other interest recorded on the land title register. Registration gives the lender formal priority and enforcement rights.
Related party: A person or entity connected to the borrower, such as a director, family trust or associated company.
Residual stock: Completed but unsold units, townhouses or lots left in a development after the construction loan matures. Read more.
Second mortgage: A registered mortgage that ranks behind an existing first mortgage. It lets an owner borrow against remaining equity without refinancing the first loan. Read more.
Settlement: The moment a loan or property purchase completes: documents are exchanged electronically or physically, funds move and the title is updated.
Settlement shortfall: The difference between the money needed to settle a purchase and the funds available on the day. Read more.
Stamp duty (transfer duty): A state tax on property transfers, payable to the state revenue office within a set period after purchase. Rates and concessions differ by state.
Statutory demand: A formal demand for payment of a debt owed by a company. If not paid or set aside within the time allowed, the company is presumed insolvent. Read more.
Strata title: Ownership of a lot in a building or complex with shared common property, managed by an owners corporation or body corporate.
Super guarantee charge: The charge payable when employers do not pay the full super guarantee on time, including interest and an administration component.
Term: How long the loan runs. Short-term secured loans commonly run for months rather than years, with flexibility to extend if the exit is delayed.
Third-party security: Property owned by someone other than the borrower, such as a director or relative, offered as security for the loan.
Title search: A search of the land registry showing who owns a property and what is registered against it. Lenders order one for every secured loan.
Torrens title: Australia's system of land registration, where the government register is conclusive evidence of ownership and registered interests.
Unregistered interest: An interest in land that is not recorded on the register, such as an equitable charge. A caveat is commonly used to protect it.
Winding-up application: A court application to have a company wound up, often filed after an unpaid statutory demand. Read more.

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Secured lending glossary

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