What a caveat actually is
A caveat is a notice lodged on a property's title that warns the world you have an interest in it. It does not transfer ownership and it is not a mortgage. In a caveat loan, the lender advances money and lodges a caveat so the property cannot be sold or further mortgaged without dealing with them first. Because lodging a caveat is quick and does not need the existing lender's cooperation in the way a second mortgage does, the money can move in days.
Caveat loan or second mortgage
| Caveat loan | Second mortgage | |
|---|---|---|
| How it is secured | A caveat noted on the title | A mortgage registered behind the first lender |
| Needs the first lender's consent | Not usually, though the first mortgage terms may still be breached by it | Usually yes, through a deed of priority |
| Speed | Fastest option, often days | Slower, because consent and documents take time |
| Typical term | Very short, weeks to months | Short to medium, months to a few years |
| Cost | Highest, reflecting the speed and the weaker security position | High, usually below a caveat loan |
| Best for | A gap of weeks with a certain exit | A larger or slightly longer need where consent is achievable |
What funders look at
- Equity. What the property is worth against everything already secured on it. A caveat sits behind the registered mortgages, so the room underneath is the whole of the lender's protection.
- The exit, and its date. A caveat loan is written over weeks or a few months. The lender wants the event that repays them, with evidence.
- Purpose. These facilities are for business or investment purposes. A lender who believes the money is for personal use should be treating the loan as regulated consumer credit.
- Title and cooperation. Who else is on the title, whether a first mortgagee's consent is needed under its own terms, and whether your solicitor is ready to act.
Most private lending is for a business or investment purpose, which sits outside the National Credit Code. That is part of why it moves fast. It also means the consumer protections attached to a regulated home loan do not apply: the loan is short, the cost is higher, default interest can be steep, and the security can be enforced quickly. Read the terms, take legal advice, and be sure of your exit before you sign.
The risks, plainly
- Cost. Short facilities carry establishment fees, legal costs and interest that can be quoted monthly. Over a few weeks the dollar cost can be modest; over a year it is not.
- Default interest. If the exit slips, the rate that applies after the due date is where the real damage happens. Ask for the number before you sign.
- Breaching your first loan. Many mortgage contracts prohibit granting further interests over the property. A caveat can put you in default of a loan you are otherwise paying perfectly.
- It is not a long term fix. If the underlying problem is cash flow rather than timing, a caveat loan buys weeks and adds cost. A restructure, a sale, or a proper refinance is the better answer.
When it is the right call
When the money completes something: a settlement that otherwise fails, stock for a contract already signed, a tax debt that is stopping a refinance, a short gap before a sale settles. In each case the loan has a job, a date and a source of repayment. That is the test to apply before the paperwork.
Common questions
How quickly can a caveat loan settle?
Often within a few days of the documents being signed, which is the whole point of the structure. The practical limits are the valuation (sometimes waived on short, low geared facilities), your solicitor's availability and how clean the title is.
Do I need my bank's permission?
A caveat can usually be lodged without the first lender's involvement, but that is not the same as being allowed to. Check your mortgage terms, because granting a further interest is often a breach. Joshua will tell you where that risk sits before you commit.
Can I get a caveat loan for personal use?
These facilities are written for business and investment purposes. If the purpose is personal, domestic or household, the lending is regulated consumer credit and a caveat loan is the wrong instrument.
How much can I borrow against a caveat?
It depends on the equity left after the registered mortgages, the quality of the property and the exit. The lender is measuring everything secured against the value, not just their own advance.
Sources
- ASIC Report 814, Private credit in Australia (22 September 2025), checked 26 October 2026
- ASIC: FAQs, does the credit legislation apply?, checked 26 October 2026
- National Credit Code, section 13 (business purpose declaration), National Consumer Credit Protection Act 2009 Schedule 1, checked 26 October 2026
- ASIC Act 2001, Part 2 Division 2 (misleading or deceptive conduct in financial services, which applies to credit facilities), checked 26 October 2026
General information only, not credit advice. It doesn’t take your objectives, financial situation or needs into account. Rules and figures change; check them, or talk to Joshua, before you rely on them.