Quick answer
A caveat loan is a short-term business loan where the lender protects its interest by lodging a caveat on the title of a property you own, rather than registering a full mortgage. It's commonly used for difficult files where the need is urgent and short, such as clearing a tax debt or creditor before a sale or refinance. The exit plan matters more than anything else.
Key points
- A caveat stops the property being sold or refinanced without the lender's knowledge.
- Caveat loans are typically short-term and simpler to put in place than a registered mortgage.
- They often sit behind an existing first mortgage.
- A clear, realistic exit is essential before you sign.
- Security
- Caveat on the property title
- Property-secured
- $20k to $5m
- Term
- Short, with a planned exit
Some business problems are sharp but short. A tax debt that needs clearing before a property sale settles. A creditor demanding payment while a big invoice is thirty days away. A refinance with the bank that will happen, just not in time. For these, a caveat loan is often the tool specialist lenders reach for.
It’s a useful tool. It’s also one to use with your eyes open.
How does a caveat loan work?
Instead of registering a full mortgage, the lender lodges a caveat on the title of a property you (or a related party) own. The caveat is a public notice that the lender claims an interest in the property. While it’s there, the property can’t be sold or refinanced without the lender’s interest being dealt with. When the loan is repaid, the caveat is withdrawn.
| Feature | Caveat loan | Registered second mortgage |
|---|---|---|
| How the lender is protected | Caveat lodged on title | Mortgage registered on title |
| Typical term | Short | Short to medium |
| Paperwork | Usually simpler | More formal |
| Existing first mortgage | Usually stays in place | Usually stays in place |
| Best for | Defined, short-term needs with a clear exit | Somewhat longer needs behind a bank |
Caveat loans sit within our property-secured range of $20,000 to $5,000,000, over residential or commercial property.
Why are caveat loans common for difficult files?
Because the lender’s focus is narrow and practical: the property’s equity and the exit. A long credit history, recent financials and a spotless ATO record matter less. That’s why caveat loans often suit:
- Tax debt that needs to be cleared before it escalates. The ATO can issue a company a statutory demand requiring payment or a payment plan within 21 days (ATO legal action). See business loans with ATO debt.
- Pressing creditors while a known payment is on its way. See funding to settle suppliers and creditors.
- Bridging to a sale or refinance that’s already in motion.
To check whether a caveat loan fits your situation, start a 60-second enquiry. There’s no credit check when you first enquire.
What questions should I answer before taking one?
The exit is everything. Before signing, be able to answer:
- How exactly will I repay it? A settled sale, a bank refinance, a contract payment, a tax refund?
- When? Is the date realistic, with some room for delay?
- What if it’s late? What would an extension cost, and is it available?
- Is anything else relying on the same property? A first mortgage, another caveat, a guarantee?
- Is a caveat the right tool at all? If the need is longer or recurring, a second mortgage behind the bank or a longer property equity loan may suit better.
A good lender will ask these questions too. If yours doesn’t, ask them yourself.
What property can support a caveat loan?
Most types of residential and commercial property can, including some that banks won’t favour. Vacant land and rural property may be possible, usually at a more conservative amount. Our page on unusual security explains how lenders approach it. The owner of the property must agree to the caveat, and if it’s owned by a trust or company, that entity needs the power to give security.
Illustrative example: bridging to a settled sale
Illustrative only, not a real client. A small construction company in Brisbane has contracted to sell a vacant lot it owns, with settlement in eight weeks. Meanwhile, a supplier has lodged a claim, and the ATO has sent a final notice on BAS arrears. The bank won’t lend against a lot that’s already under contract.
A specialist lender provides a caveat loan against the director’s investment property, paying the supplier and the ATO directly. The loan is repaid from the lot’s settlement proceeds, and the caveat is withdrawn.
How is a caveat loan priced?
Like every loan we arrange, it’s priced on the individual file rather than a published rate. The things that move the cost are the equity in the property, the amount, how long you need the money, the credit history, and how certain the exit looks. Short-term, property-backed lending generally costs more than a bank loan, because the lender is moving on a file the bank has passed on and relying on a defined repayment event.
The fairest way to judge it is against the cost of doing nothing: penalties and interest building on a tax debt, a supplier stopping supply, or a sale falling over because a creditor got there first. If the caveat loan solves a problem that costs more than the loan, and the exit is solid, it’s usually doing its job. If the numbers don’t stack up that way, say so on the call and we’ll look at longer options instead.
Short, sharp problem? Let’s check the exit together.
Caveat loans are a practical fix for defined problems, and we’ll help you stress-test the exit before you commit. Sixty seconds is all the form needs, with no credit check when you first enquire. We keep your file in-house instead of circulating it, and whoever calls you will ask the hard exit questions up front.
Please be accurate about the property, what’s owing on it and how you plan to repay. Those three facts decide whether a caveat loan is right. See if you qualify →
Frequently asked questions
What exactly is a caveat on a title?
A caveat is a notice lodged on a property's title telling anyone dealing with the land that another party claims an interest in it. In a caveat loan, it protects the lender until the loan is repaid, when the caveat is withdrawn.
Why are caveat loans used for difficult situations?
Because they're usually simpler to set up than a full registered mortgage, and lenders focus on the property equity and the exit rather than a long credit history. That suits short, defined needs.
Can I get a caveat loan with bad credit or ATO debt?
Often, yes. Caveat lenders weigh the property and the exit most heavily. Credit issues and tax debt are considered case by case, and the loan can pay the ATO directly.
What's the biggest risk with a caveat loan?
Not having a solid exit. Caveat loans are designed to be short. If the sale, refinance or payment you're relying on falls through, you can end up extending at extra cost.