Caveat loans: the fastest way to borrow against property

Caveat loans in plain terms

Here is how a caveat loan works. You own a property, a lender advances money to your business for a short period, and to protect itself the lender lodges a caveat on your title. That caveat is a warning recorded on the land register, flagging to anyone who searches that the lender has a claim on the property. Practically, the property cannot be sold or refinanced until the caveat has been dealt with, and that is enough protection for the lender to release funds.

What makes caveat loans attractive is how quickly they come together. A full mortgage needs more paperwork and, where a bank loan already exists, frequently the bank’s approval. A caveat can usually be lodged in a fraction of the time. When a business has days, not weeks, that speed can be the difference between a deal closing and falling over.

Good reasons to use one

A caveat loan fits a short, clearly defined need with an obvious way out, for example:

• covering payroll or a supplier while waiting on a customer payment
• paying a statutory demand inside its time limit
• meeting an ATO deadline or the window on a director penalty notice
• funding a deposit on a property or business before the bank’s approval comes through
• saving a settlement that will collapse without money this week

If the term looks long or the exit is uncertain, start with a registered second mortgage or a first mortgage instead.

Caveat, second or first mortgage

Feature	Caveat loan	Second mortgage	First mortgage
Lender’s protection	Caveat recorded on title	Mortgage registered behind the bank	Mortgage registered in first place
Bank consent	Frequently not needed	Needed in some cases	Not relevant
Speed	Quickest	Quick	Quick, subject to paying out any current loan
Suits	Urgent, short needs	Short to medium terms	Larger or longer needs
Later options	Convert to a registered second mortgage	Refinance	Refinance

Loan size

You can borrow between $20,000 and $5,000,000 on a caveat. What you can borrow depends on the equity left once the existing mortgage is counted, the type of property and the strength of the exit. Since a caveat ranks behind registered interests, lenders usually take a slightly more cautious view of LVR than they would for a registered mortgage. Plug your current balance into the LVR calculator to see the combined figure.

From first call to funds

1. Enquiry. Give us the property, how much you need, what it is for and how you will repay.
2. Assessment. We review the property using title searches, recent nearby sales and photos. Approval does not wait on a valuation.
3. Terms. You get indicative terms showing every cost. Interest can be prepaid out of the advance or added to the loan.
4. Documents. You sign the loan agreement and caveat paperwork, with independent legal advice for any guarantor.
5. Lodgement and funds. The caveat goes on the title and money is paid out, with 24-hour funding possible on straightforward deals.
6. Exit. Once your sale, refinance or payment comes in, the loan is repaid and the caveat comes off.

Check whether a caveat loan can meet your deadline: find out if a caveat loan fits your deadline.

Every state does it differently

Land titles are run separately in each state and territory, so the rules on lodging a caveat, how long it can remain and how it can be challenged or made to lapse all vary. A Queensland property goes through Titles Queensland, a Western Australian one through Landgate, and so on. Your lender and solicitor manage these details, but accurate property information up front helps them move faster. Our location pages list the registry in each state.

If you need it for longer

Exits slip. A sale campaign drags on, a refinance needs another few weeks, a customer pays late. Caveat loans are flexible, so you can keep the loan for as long as you need. If the extra time is significant, converting to a registered second mortgage often makes sense, putting the arrangement on a firmer footing and frequently lowering its cost. Our guide to converting a caveat to a second mortgage covers when and how.

Questions worth asking

• In dollars, what will the loan cost over the expected term?
• How much more if the exit is two months late?
• Can I repay early, and does that cost anything?
• If the term extends, will the caveat become a mortgage, and on what terms?
• Who covers the cost of withdrawing the caveat at the end?

An illustrative caveat loan

Illustrative only. A residential building company is served a statutory demand by a timber supplier, with only a few days left to pay. Two finished townhouses are sold, but settlement is six weeks off. The director owns an investment unit with a small bank loan and plenty of equity.

A caveat loan over the unit pays the supplier before the deadline. Interest for the expected term comes out of the advance up front, so there is nothing to pay along the way. When the townhouses settle, the proceeds repay the loan and the caveat is withdrawn. The bank loan on the unit is left untouched, and the company steers clear of the presumption of insolvency that an unpaid statutory demand would have created.

A clear exit matters most

Since caveat loans are built for short terms, lenders lean heavily on a firm repayment date. The best evidence is a signed contract of sale, a refinance approval or a payment schedule under a contract. If your exit is real but not yet on paper, tell us: a specialist can suggest ways to evidence it, or point you to a registered structure better suited to a longer timeframe.

Fast, without the guesswork

Got property equity and a deadline? A caveat loan can often fix the problem in days. Give us the address, a rough value, what is owed on the current mortgage and exactly how you will repay. Enquiring involves no credit check, your details stay inside one team, and a specialist reads your enquiry before picking up the phone. Ask about a caveat loan today.