Quick answer
A caveat loan is a short-term business loan secured by a caveat lodged on the title of a property you own. The caveat stops the property being sold or refinanced without the lender knowing. Paperwork is minimal and terms are usually a few weeks to twelve months. They suit urgent, short needs with a clear exit, but they're one of the more expensive forms of business lending.
Key points
- Secured by a caveat on your property title, not a mortgage.
- Usually a few weeks to twelve months.
- Very little business paperwork.
- Expensive, so only for short needs with a clear exit.
- Security
- Caveat on property title
- Typical term
- Weeks to 12 months
- Paperwork
- Property details, ID, ABN, exit plan
- Cost
- Higher than mortgages
A caveat loan is a short-term business loan that uses property as security without a full mortgage. Instead, the lender lodges a caveat on your property’s title, a formal notice that it has an interest in the property. Because a caveat is quicker and simpler to lodge than a registered mortgage, these loans ask for very little paperwork. They’re also among the most expensive ways a business can borrow.
Used well, for the right job, they solve real problems. Used poorly, they get costly fast.
How a caveat loan works
- You apply with details of the property, the amount and your exit plan.
- The lender confirms the property’s value and your equity.
- Loan documents are signed and the caveat is lodged on the title.
- Funds are released to you.
- At the end of the term, you repay and the caveat is withdrawn.
The caveat doesn’t transfer ownership or replace your existing mortgage. It sits on the title and stops the property being sold or refinanced without the caveat being dealt with, which gives the lender its protection.
When a caveat loan makes sense
| Situation | Why it can fit |
|---|---|
| Paying an urgent tax bill or supplier | Short need, quick to arrange |
| Bridging until a contract payment arrives | Clear, dated exit |
| Securing a business opportunity before longer funding is ready | Gets you there while the main loan is arranged |
| Settling a purchase while waiting on a property sale | Known sale proceeds as the exit |
The common thread is a short need with a clear end. If you know exactly where the repayment is coming from, and when, a caveat loan can be useful.
When it doesn’t
- Funding something that will take years to pay back.
- Covering ongoing losses with no plan to fix them.
- Using one caveat loan to repay another.
- Any situation where the exit is a hope rather than a plan.
If your need is longer, a second mortgage or first mortgage usually costs less over the term.
Understanding the cost
Caveat loans often include an establishment fee, legal costs, a monthly charge and sometimes a fee to remove the caveat. Some lenders deduct interest for the whole term from the loan up front. Ask for every cost in writing and work out the total you’ll repay for the full term, not just the first month. If the term is extended, costs usually climb, so build in some buffer when choosing the length.
What you’ll need
- Proof of ownership and the property address.
- A statement for any existing mortgage.
- Photo ID for every owner and borrower.
- ABN, and ACN for companies.
- A written exit plan: how and when you’ll repay.
Most lenders won’t need tax returns or financials, which is part of the appeal. The business loan checklist covers the full list across loan types.
An illustrative example
A Sydney building company has a progress claim of $210,000 approved and due in seven weeks, but needs $120,000 now to pay subcontractors and keep the next stage moving. The director owns an investment unit with solid equity. A three-month caveat loan covers the gap, with the progress payment as the exit. The cost is significant, but less than losing the subcontractors and stalling the job. Illustrative only.
Risks to understand
If you can’t repay at the end of the term, the lender can take steps to recover the debt, which may include converting its interest into a mortgage or taking court action. Extensions are sometimes possible but usually expensive. Everyone on the title should understand the arrangement and get independent legal advice. If you’re already behind on a home loan or other debts, talk to a financial counsellor before adding a short-term loan.
Caveat loans and your existing mortgage
Most caveat loans sit behind an existing home loan, so it’s worth checking your current mortgage terms first. Some home loan contracts restrict other interests being registered on the title without consent. A lender experienced in caveat lending will know how to handle this, but it can add a step, so mention your existing lender early. Your first lender will also see the caveat if you try to refinance later, which is another reason to keep the caveat loan short and clear it on time.
If you’re unsure, ask first
Tell us what you need, what property you own and how you plan to repay. There’s no credit check to make an enquiry, we don’t hand your details around a crowd of lenders, and one real person reviews it and calls you. If a caveat loan isn’t the right fit, we’ll say so and suggest what is. Accurate answers help us get it right. Start your enquiry here.
Frequently asked questions
What is a caveat on a title?
A caveat is a notice on the property title that warns anyone dealing with the property that someone else claims an interest in it. It effectively stops a sale or refinance until it's removed.
Can I get a caveat loan with an existing mortgage?
Usually, yes, if there's enough equity. The caveat sits behind your existing mortgage.
Why are caveat loans expensive?
They're short-term, quick to arrange and lightly documented, and the caveat is weaker security than a registered mortgage. Lenders price for that risk.
What happens at the end of the term?
You repay the loan and the caveat is removed. If you can't repay, extensions may be possible but are usually costly, so a solid exit plan matters.