What is a Caveat Loan?

A caveat loan is a short-term form of finance secured by placing a caveat on the title of a property. It enables borrowers to access funds extremely quickly without the delays associated with full mortgage registration. Caveat loans are commonly used by business owners, investors and borrowers needing urgent access to capital for business or investment purposes. To view Innovate Funding’s product page, visit: Caveat Loan.

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How a Caveat Loan Works

A caveat is a legal notice on a property title preventing any dealings—such as new mortgages, property transfers or sales—without the caveat holder’s consent. This protects the lender’s interest while allowing the borrower to access funds quickly.

The process typically works as follows:

1. Borrower offers real estate as security

2. Lender assesses equity, exit strategy and loan purpose

3. Lender lodges a caveat on the title

4. Funds can be released in as little as 24 hours

5. Loan is repaid via sale, refinance or business cashflow

6. Caveat is removed once the loan is discharged

Because lodging a caveat is far faster than registering a full mortgage, approval and settlement times are significantly accelerated.

Further detail on equity and lender exposure can be found at the
LVR & Lending Scope page.

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Common Uses for Caveat Loans

Caveat loans are suitable for fast-paced, business-related scenarios such as:

• urgent working capital

• paying suppliers, contractors or wages

• managing ATO or tax obligations

• securing time-sensitive business opportunities

• urgent property settlements

• bridging short-term cashflow gaps

• purchasing stock or equipment

• renovation or value-add projects

Borrowers seeking less urgent funding may also consider
Short Term Business Loans.

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Why a Second Mortgage Can Be More Advantageous Than a Caveat Loan

A caveat loan prioritises speed above all else. However, when time allows, a second mortgage is often a better option for borrowers and lenders.

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When a Second Mortgage is the Better Option

A second mortgage is often more advantageous because:

1. A Second Mortgage Usually Has Lower Interest Rates

A second mortgage is fully registered on title.
This gives lenders stronger legal protection compared to a caveat.

Stronger security for the funder means:

• lower risk

• lower pricing

• better terms for the borrower

In contrast, a caveat loan carries more uncertainty for the lender and must be priced accordingly.

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2. Second Mortgages Allow Larger Loan Amounts

Because a second mortgage is a formal registered security, funders may:

• lend higher dollar amounts

• allow longer loan terms

• offer greater flexibility for complex scenarios

Caveat loans are generally capped at smaller or medium-sized funding needs.

Learn more at: Second Mortgage Loans.

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3. Second Mortgages Provide More Predictable Legal Protection

With a second mortgage:

• the lender is legally recognised behind the first mortgage

• enforcement processes are clearer and more established

• lenders can offer more competitive pricing

• borrowers benefit from structured loan terms and clarity

A caveat simply prevents dealings on the title but does not give the same security as a registered mortgage.

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4. Best For:

A second mortgage is best when borrowers want:

• lower interest rates

• longer loan terms (up to 24 months)

• larger loan amounts

• structured equity release

• predictable repayment terms

• improved lender flexibility

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When a Caveat Loan Is the Right Choice

A caveat loan is best when:

• funds are needed within 24–48 hours

• the loan purpose is urgent and business-related

• the borrower has short-term deadlines

• a full mortgage cannot be processed quickly enough

• the loan term is brief

• the exit strategy is near-term and clear

If speed is the priority, a caveat loan is unmatched.

If value, pricing and structure matter more, a second mortgage is often superior.

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Who Caveat Loans Suit

Caveat loans are suitable for borrowers who:

• require rapid, business-purpose funding

• have strong equity in a property

• cannot wait for first or second mortgage registration

• need to act quickly on opportunities

• have a clear and short-term exit strategy

• have moderate or impaired credit histories

Borrowers with more complex credit situations may also consider:
Bad Credit Business Loans.

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Key Features of a Caveat Loan

• rapid approval and settlement

• terms typically between 1 and 12 months

• capitalised interest options

• minimal documentation

• secured against real estate

• business-purpose only

• flexible in structure

Example Scenario

A wholesaler in Sydney requires 90,000 within 48 hours to pay suppliers and secure a discount on bulk inventory. Bank funding is not viable due to slow processing and incomplete financial statements.

The lender confirms equity in the borrower’s investment property, lodges a caveat, and releases funds the next day.
The loan is repaid four months later once the stock is sold and revenue is received.

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Risks and Considerations

Borrowers should understand that caveat loans involve:

• higher interest rates due to lender risk

• short repayment periods

• title restrictions while the caveat is in place

• business-only loan purposes

• the need for a reliable exit strategy

Borrowers unsure of their optimal loan structure should explore:
Second Mortgage Loans
First Mortgage Loans

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FAQs About Caveat Loans

What is a caveat in lending?

A caveat is a legal notice placed on a property title to protect a lender’s interest while funds are advanced.

How fast can a caveat loan settle?

In many cases, caveat loans can settle within 24–48 hours.

Is a second mortgage cheaper than a caveat loan?

Yes. Second mortgages are lower risk for funders, meaning borrowers usually benefit from lower rates and fees.

Can I get a caveat loan with bad credit?

Yes, provided the borrower has strong equity and a clear exit strategy.

Can caveat loans be used for personal reasons?

No. They must be used for business or investment purposes.