Quick answer
A caveat loan is a short-term business loan where the lender lodges a caveat, a notice on your property's title, to protect its claim. You sign a loan contract and security documents; the caveat then warns that the lender has an interest and stops most dealings with the property until it's paid. It is quick because no new mortgage is registered, and it works best when you can repay within months.
Key points
- A caveat is a notice on title that records the lender's claim; it is not the same as a registered mortgage
- You still sign a contract and security documents, so the paperwork matters even though the process is quick
- While the caveat is on, selling or refinancing the property will usually need the lender's agreement
- Total dollars over the expected term, not a headline monthly figure, is the honest cost comparison
- The loan ends when you repay and the lender withdraws the caveat, so ask how and how fast that happens
If you’ve been told a caveat loan might suit your situation, there’s a fair chance you’ve also been told very little about what that means for your property. This guide goes through it the way you’d want it explained across a desk: what a caveat is, what you actually sign, what happens day to day while it’s there, and how it comes off.
The detail on the loan product itself is on our caveat loans page. This guide is the owner’s-eye view.
What does a caveat do, and why do lenders use one?
Each state and territory runs its own land register, and your property has a title entry there showing the owner and any registered claims. A caveat is a notice placed on that entry saying another party asserts an interest in the land.
Caveats aren’t only a lending tool. They are also used in disputes, for example by someone claiming a share of a property. The Titles Queensland guide on lodging caveats describes them as a way of protecting an interest while it’s unregistered, and the other state registries work on the same principle. For a lender the point is simple: the caveat puts the world on notice, and the registry will generally refuse to register dealings that clash with the claim.
Our glossary has short entries for caveat and caveator if you want the definitions.
What do you actually sign?
Owners are often caught out here. A caveat is lodged by the lender, but the right to lodge it comes from what you sign. Typically that’s:
- A loan contract setting out the amount, the term, fees, repayment arrangements and what counts as a default.
- A security document, such as an agreement to grant the lender a mortgage or charge over your interest in the property, which is the claim the caveat protects.
- A business purpose declaration, confirming that the money is for the business.
- Consent or authority documents for anyone who co-owns the property.
Because there is no new mortgage registered behind your bank’s, the process is lighter, and that is why caveat loans can move in days. Lighter paperwork doesn’t mean lighter obligations, though. The loan contract is enforceable, and the security entitles the lender to take steps against the property if the loan isn’t repaid. If you haven’t read the documents before, our walkthrough of a letter of offer shows which clauses deserve the most attention.
Caveat or second mortgage?
Either can unlock equity in a home or premises that is already mortgaged. What separates them is registration. A second mortgage is a registered mortgage behind your first lender, and it often needs the first lender’s involvement. A caveat relies on a notice instead, so it tends to be quicker and used for shorter periods. Our guide to second mortgages for business and the comparison of caveat loans versus second mortgages cover this in depth.
What changes while the caveat is on your title?
Day to day, probably very little. You still live in or run the property, pay the first mortgage and keep insurance in place. But a few things do change:
| Situation | What happens |
|---|---|
| You try to sell | Settlement usually needs the lender to be repaid and the caveat withdrawn, so build that into the contract timetable. |
| You try to refinance the first mortgage | The new lender will see the caveat on a title search and will want it dealt with or accounted for. |
| You try to borrow again against the property | A further lender will see the caveat and treat the claim as ranking ahead or beside it. |
| A title search is done by anyone | The caveat appears, with the caveator’s name. |
That visibility is worth thinking about if the property is your home and you have, say, a sale or a refinance planned. See our guide on what happens to a caveat when you sell.
Should you worry about your existing lender?
Banks are generally good lenders, and keeping them happy is sensible. A caveat is lodged without a new registered mortgage, but your existing home loan contract may limit extra borrowing on the same asset or oblige you to notify the bank. Read that contract before you sign anything new. If your bank declined the business loan, a caveat is a legitimate route, but it should be a considered one, not a way to avoid a conversation you need to have. The steps in what to do after a loan is declined can help.
What does a caveat loan cost?
We never publish rates here, because they depend on the deal, so judge the loan by the dollar cost across the whole term. Typical components are an establishment fee, interest (sometimes added to the balance), legal and valuation costs, and caveat lodgement and withdrawal fees.
Ask every lender two things in writing:
- The full dollar amount payable if you clear the loan on the planned date.
- The full dollar amount if you need two extra months.
The second number is the one owners overlook. A loan priced for four months can become expensive at eight. The caveat loan calculator lets you test both scenarios with figures from your quote.
If you’re not sure the numbers stack up, tell us the figures and one of our people will sit down with them.
How does it end?
A good caveat loan ends cleanly. You repay, usually from a sale, a refinance, a large invoice or cash flow, and the lender withdraws the caveat. Ask the lender:
- how soon after repayment it will lodge the withdrawal,
- whether there’s a fee for withdrawal,
- what happens if the due date arrives before your sale or refinance does,
- whether it will extend the term and at what cost.
Registries also provide a way to challenge a caveat that has no valid basis. In New South Wales, for example, the owner can serve a lapsing notice, after which the caveat lapses unless the caveator takes court action. That process isn’t a way to skip repayment, and a lender with a genuine loan contract will respond. It does mean lenders have good reason to withdraw promptly once they’re paid. Our guide to how caveats are removed after repayment goes through it by state.
Is a caveat loan right for you?
A caveat loan usually makes sense if each of these holds:
- the need is urgent and for the business,
- you hold equity in real estate, mortgaged or not,
- you can point to a specific repayment event within months,
- you’ve compared the total cost with a slower alternative.
If the need runs beyond a year, a longer secured loan is usually cheaper. If you’re unsure how the lender sees the deal, our article on how caveat loans get approved shows the five questions it asks.
Ready to find out what’s possible?
You don’t have to understand caveats perfectly to get started; that’s what the conversation is for. Our enquiry takes about a minute, and it doesn’t involve a credit check, so asking can’t dent your credit file.
Your enquiry stays with us rather than being shopped around. A named person reads it and calls you, and the more precisely you describe the property, what’s owed on it, the amount and the date you need it, the sooner the right option appears.
Frequently asked questions
What is a caveat on a property?
A caveat is a notice recorded on the property's title at the state land registry. It tells anyone searching the title that someone claims an interest in the land. Registries generally won't register most dealings that conflict with that interest while the caveat stays in place.
Is a caveat loan secured?
Yes. The security is your interest in the property, documented in the loan contract and protected by the caveat. The lender can enforce its rights if the loan isn't repaid, so treat it as seriously as any other loan secured on real estate.
Can I still sell my property with a caveat on it?
Usually only with the caveator's agreement, because the caveat is what stops a sale or transfer from being registered. In practice the lender is repaid from the sale proceeds at settlement and withdraws the caveat.
Does my bank have to know about a caveat loan?
Not as a rule, but the caveat appears on a title search, and your existing mortgage terms may restrict further borrowing or require notice. Read your current loan contract so there are no surprises.
How long does a caveat last?
It lasts until it's withdrawn or removed. Land registries have processes, such as lapsing notices in some states, that allow an owner to challenge a caveat, so a lender needs a valid claim. For a loan, the caveat is normally withdrawn after repayment.
What should I check before signing a caveat loan?
The total dollar cost over your expected term and an extended one, the fees, who holds the caveat, what happens if you repay early or late, and how and when the caveat will be withdrawn. Ask for all of it in writing.