What is a caveat loan in Australia?
A caveat loan is a short-term loan secured by lodging a caveat — a statutory notice of equitable interest — against a property's title instead of registering a full mortgage. That single legal distinction determines everything: how fast it settles, what it costs, which lenders will write it, and whether it's the right structure for the deal.
Aurelius Private are private lending brokers. When a borrower needs fast capital against property equity, we assess the deal — LVR, exit, timeline, first mortgagee's position — and match the structure to the lender on our 131+ private lender panel whose appetite and pricing best fits. Sometimes that's a caveat loan. Sometimes a registered second mortgage is a better tool. This guide explains when each is appropriate and why the distinction matters.
How a caveat works on title
Australia's property system runs on Torrens title — a state-guaranteed register of land ownership and encumbrances. When a caveat lender advances funds, their solicitor lodges a caveat with the relevant state land titles office, declaring that the lender holds an equitable interest in the property.[1]
The practical effect: the registered owner cannot sell the property, refinance it, or grant further security without either the caveator's written consent or a court order. The lender's position is protected. But a caveat does not create a registered charge over the land. On default, the lender cannot exercise a power of sale the way a registered mortgagee can. Enforcement requires court proceedings.
That is the core legal distinction from a registered mortgage. Weaker enforcement mechanism equals higher risk for the lender, and that risk is priced into the rate.
Caveat loan vs second mortgage: the key differences
Both sit junior to the first mortgage in the capital stack. Both release equity from an already-encumbered property. The mechanism and the cost implications differ substantially.[2]
| Caveat loan | Registered second mortgage | |
|---|---|---|
| Security type | Equitable interest (caveat on title) | Registered charge (mortgage on title) |
| First mortgagee consent | Not required | Required |
| Settlement speed | 24–72 hours | 8–21 days (consent process) |
| Enforcement on default | Court order required | Power of sale available |
| Rate | Higher (weaker security) | Lower (stronger security) |
| Best suited to | Urgent, sub-3-month deals | Longer-term, cost-sensitive positions |
The first mortgagee consent requirement is what creates the settlement gap. A major bank typically takes 10–14 business days to review and respond to a second mortgage consent request. A caveat skips that process: the lender lodges directly with the titles office, and the deal can fund in days.
The cost of that speed: because a caveat lender has weaker enforcement rights on default, the rate premium is real. At short durations — 30, 60, 90 days — the premium is manageable relative to the outcome. Held for 6–12 months, the compounded rate differential versus a registered second mortgage becomes the dominant cost driver. Structure the deal to fit the timeline.
When a caveat loan is the right tool
Settlement is the constraint. ATO debt falling due in 48 hours. A settlement shortfall on a property purchase. A business contract that lapses without cleared funds by the end of the week. When 8–21 days is not an option, a caveat loan is typically the only property-secured structure that can execute. A clean file with clear equity and a defined exit settles in 24–72 hours.
The first mortgagee won't consent — or will take months. Some non-bank first mortgagees refuse second mortgage consent entirely. Others respond on timelines that make the deal unworkable. A caveat bypasses the consent requirement, so the first lender's position or process does not block the deal.
Short term, clear exit. A borrower selling in 60 days and needing to bridge. A developer waiting on a construction facility to refinance land. A business releasing equity to fund a contract with a defined completion date. When the exit is specific and the timeline is 1–3 months, the rate premium is a manageable cost.
When a caveat loan is not the right tool
The deal runs longer than 90 days and a registered second mortgage is available. The rate difference between a caveat and a registered second mortgage compounds over time. If the first mortgagee will consent and the timeline allows for the process, a registered second mortgage delivers a lower rate for the same equity release. Aurelius Private structures deals to match the exit — if the timeline is long enough for a second mortgage, that is usually the better structure to place.
The combined LVR leaves insufficient headroom. Caveat lenders underwrite to the combined position: first mortgage plus caveat together. If the first mortgage already sits at 70%+ LVR and the security is in a secondary or regional market, appetite thins quickly. Limited equity cushion plus a weaker enforcement mechanism is a hard combination for most lenders to price competitively. In those situations, the deal may require a different structure or a different security entirely.
For context on the broader question of broker versus direct lender, see our piece on the private lender vs private lending broker distinction.
Rates, LVR, and terms — honest on cost
Caveat loans are priced per month because the terms are short and monthly pricing is more meaningful on a 60-day deal than an annualised rate.
Rates vary by lender, LVR, security quality, exit certainty, and term. Some lenders on our panel advertise entry rates below 1% per month for strong deals: low combined LVR, clean metropolitan residential or commercial security, unconditional exit.[3] At the other end of the risk spectrum — higher LVR, secondary market, exit reliant on refinance — pricing moves well above that. There is no single market rate; the rate is a direct function of the risk position the lender takes.
Typical deal parameters across Aurelius Private's panel:
- Loan size: $100K–$10M+
- Term: 1–6 months
- Combined LVR: to 70–75% of property value (first mortgage plus caveat)
- Security: real property, metropolitan bias; commercial security considered
- Purpose: commercial only
On purpose: Aurelius Private brokers commercial-purpose deals only. NCCP-regulated lending — owner-occupied residential, investment residential of four units or fewer, and consumer-purpose finance — sits with our affiliated brokerage, Aurelius Capital, a credit representative (560687/562362) of Connective Credit Services Pty Ltd (ACL 389328).
What the process looks like
Caveat deals are documentation-light. Equity and exit are the primary underwriting factors; income verification is minimal or absent on many deals.[4]
A clean caveat scenario through Aurelius Private:
- Submit the scenario — property address, current first mortgage balance, amount needed, exit strategy, required settlement date.
- Indicative terms returned — within four business hours: rate, LVR, term, lender path.
- Formal application — brief; many deals run on a desktop valuation or AVM, not a full valuation.
- Solicitors engage — caveat lodged with the state titles office; loan documentation executed.
- Funds released — 24–72 hours from engagement for a clean file.
Aurelius Private's role is not to pass a file to a lender directory. We structure the deal — LVR, term, exit framing — and place it with the lender on our panel whose appetite, enforcement comfort, and rate align. One application process, matched to the right lender.[2]
Where caveat loans sit in the private credit stack
A caveat loan and a registered second mortgage occupy the same capital stack position — both sit junior to the first mortgage, secured against residual equity. The difference is the security mechanism, not the ranking. Both are private credit instruments, priced accordingly. Compare them to bridging finance and the overlap is significant: where bridging typically uses a first mortgage on the exit security, caveat and second mortgage structures work against existing encumbered property.
For deals where speed is the constraint, a caveat loan is usually the right structure. For deals where rate and term matter more than settlement speed, a registered second mortgage delivers better outcomes for the same capital.
Frequently asked questions
How does a caveat loan work in Australia?
A lender lodges a caveat — a statutory notice of equitable interest — against the property's Torrens title. This prevents the owner from selling or refinancing without consent. Because no mortgage registration is required and no first mortgagee consent is needed, funds can settle in 24–72 hours.
What is the difference between a caveat loan and a second mortgage in Australia?
A caveat is an equitable interest notice on title, not a registered mortgage. Caveat loans settle faster because they skip first mortgagee consent, but they cost more — the lender's security position is weaker and enforcement on default requires court proceedings, unlike a registered second mortgagee's power of sale.
What are typical caveat loan interest rates in Australia?
Commercial-purpose caveat loans are priced per month. Rates vary by lender, LVR, security quality, and exit certainty. Some lenders advertise entry rates below 1% per month for strong low-LVR metro security; higher-risk or higher-LVR positions price above that. No single rate applies across the market.
Can I get a caveat loan with bad credit in Australia?
Equity and exit strategy are the primary underwriting factors, not credit score. A credible exit and sufficient unencumbered equity carry more weight than income history. That said, all Aurelius Private deals are commercial-purpose only — consumer-purpose caveat lending is outside our scope.
How quickly can a caveat loan settle in Australia?
24–72 hours for a clean file with clear equity and a defined exit. The speed advantage comes from the absence of a first mortgagee consent requirement — the process that adds 8–21 days to a registered second mortgage settlement.
Got a deal?
Got a deal that needs capital against property equity, fast? Submit the scenario to Aurelius Private. We come back within four business hours with an indicative structure, lender path, and rate band — before any formal application. Submit the scenario here.
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