Caveat Loans and Bridging Finance

Caveat loans are an increasingly popular type of finance in Australia. The term “caveat” is a Latin term used in property law. The caveat means you can’t sell your property unless the caveat is removed. The caveat is only released when the loan/debt is fully repaid. When you apply for a caveat loan, you offer your property to a lender as upfront security for the loan and this security is called ‘collateral’ sometimes. You must own suitable property to take out a caveat loan against it—the properties can be residential, commercial, industrial, land or a farm in Australia but not overseas properties. A caveat loan is lodged on title behind your existing mortgage, and it acts as a form of ‘injunction'. You do not require consent from your existing bank. This also means a borrower is prevented by the ‘caveat’ from settling the sale of the property without the permission of the lender or the caveat loan provider.

Another critical factor about caveat loans is that they are not like standard mortgage loans because caveat loans can be lodged immediately and are a source of fast finance. The funds will be made available in a few days from the application. Whether for a mortgage or an investment property, accessing funds has never been faster or more accessible than a caveat loan. Caveat loans are sometimes called an ‘equitable mortgage’ or an ‘unregistered second mortgage.’

The difference between a caveat loan and a mortgage is that a lender who has the caveat on your property cannot repossess and sell the property when you fall behind in your loan repayments.

A caveat loan is secured against existing property. A caveat acts as a form of injunction, and the property can neither be used as security against any other finance nor can be sold. Therefore the existing caveat loan must be fully paid off to release it from the lender.

Caveat loans in Australia are a form of fast source of short-term financing commonly used as a supporting solution to manage the cash flow between the sale of a current and the purchase of another property. Suppose you have sold a property and need to pay for another, but the settlement period doesn’t match up, and in this situation, a caveat loan can be an ideal short-term solution to bridge this gap.

Individuals or businesses can use Caveat loans, usually for property deals . They could be used to complete renovations, construction or property development projects. Caveat loans can help raise the funds you require for construction, with a caveat on the property that will be released once the work on the property is completed and sold.

Once your caveat loan is approved for your property in Victoria, your lender will register their caveat in your property with the Land Use Victoria. In other states, this will be done with the appropriate land title office in the state, such as the Land Registry services in New South Wales etc.

Caveat loans are short-term loans, unlike mortgage loans. They are usually short-term loans for up to three years, whereas the standard loan terms for a mortgage loan in Australia are usually 25 or 30 years.  Bridging Finance is one of the most famous examples of short-term funding.

The fundamental difference between a caveat loan and a second mortgage is that a mortgage is an agreement between a borrower and a lender where the borrower offers their property to the lender as security for repayment of a loan. The lenders will have no interest in the property until the borrower defaults on loan repayments. Second mortgage lenders have rigorous lending criteria as the lender who provided the first mortgage has priority when the mortgagee fails on their payments.

Whereas a caveat loan is more straightforward and faster than both first and second mortgages and warns anyone dealing with the potential property that someone has priority interest over the same property. The fact that a caveat loan property can't be a collateral for any other finance simplifies the lending criteria.

Aus Wealth has a team of Loan Specialists for arranging fast caveat loans and is trusted by hundreds of small business owners in Australia for quick funding solutions.

We are dedicated to providing you with essential legal or financial advice on caveat loan applications for fast caveat loans. We thrive in solving complex financial problems for property developers, investors and business owners with excellent customer service.

With our experience in the equity markets and access to private investors & private mortgage funds, we have the ability to select the best lender and secure the most advantageous outcome for our clients’ borrowing needs.

We can help you get a fast caveat loan approved if you own a property in Australia with a seamless application process.