HOW A CAVEAT LOAN CAN HELP YOU OVERCOME A SHORT-TERM CASH FLOW CRUNCH

Let’s look at short-term caveat loans: what they are, their benefits and common uses.

What is a caveat loan?

The first thing to understand about caveat loans is that they are not like normal mortgage loans, as a caveat can be lodged on title immediately and enable a loan to be funded in a matter of days from application. Caveat loans are sometimes also referred to as an ‘unregistered second mortgage’ or an ‘equitable mortgage.’

You must own a property to take out a caveat loan against it. A caveat operates like a form of ‘injunction,’ which means the loan is lodged on title behind your existing mortgage (no consent is required from your bank to do so). This also means the borrower is prevented by a ‘caveat’ from settling the sale of the property without the permission of the caveat loan provider.

What are caveat loans for?

In Australia, caveat loans are a fast source of short-term funds that are commonly used to manage the cash flow between the sale and purchase of a property. If you have sold a property and need to pay for another, but settlement timing doesn’t match up, a caveat loan can be a great short-term solution.

In addition, caveat loans can be used to complete renovations or residential development projects. Caveat loans can help raise funds required for construction, with a caveat on the property, which will be released once the property is finished and sold.

Short-term caveat loans are also commonly used as a short-term option for business owners who need a fast cash flow injection, regardless of credit history. For example, you own a business, and you:

• Have a large tax bill due immediately, but won’t have the cash to pay it for a few months.
• Could benefit from a working capital injection to maintain business operations to offset invoice lags.
• Need to purchase a large amount of stock (to service an order, or to take advantage of a bulk purchase discount) and need to fund it with short-term debt.
• Similarly, fast caveat loans can be a good short-term solution for borrowers who need money in a hurry to do home renovations in preparation for sale, regardless of credit history.

What are the benefits of a caveat loan?

Short-term caveat loans have a range of features that make them appealing, including:

• They’re quick: Caveat loans can be applied for, approved and settled often within a few days.
• Minimal documentation required: The paperwork required for caveat loans is far less onerous than mortgage loans, making it easier and faster to apply for this type of loan.
• Flexible: Caveat loan terms are flexible and can typically be negotiated for anywhere from one month to three years.
• Easy: Once you have repaid the loan, the caveat on your property is lifted immediately with minimal fuss and red tape.

How to apply for a caveat loan

Different lenders have varying business loan application requirements and processes. At Mango Credit, you can submit an enquiry by phone, email or apply online. Upon receiving your enquiry or application, we email an indicative quote that details the interest rates, costs, loan structure and document requirements. If you agree with the proposal, we then issue a formal and more detailed letter of offer. You return the signed proposal with the required documents, and we ask our solicitors to issue security documents or order a valuation if needed. Once we receive the security documents, we settle by electronic transfer of funds. Click here to apply for a short-term caveat loan.

FAQS

What is a caveat on a house?

The first thing to understand about caveat loans is that they are not like normal mortgage loans, as a caveat can be lodged on title immediately and enable a loan to be funded in a matter of days from application. Caveat loans are sometimes also referred to as an ‘unregistered second mortgage’ or an ‘equitable mortgage.’

You must own property to take out a caveat loan against it. A caveat operates like a form of ‘injunction,’ which means the loan is lodged on title behind your existing mortgage (no consent is required from your bank to do so). This also means the borrower is prevented by a ‘caveat’ from settling the sale of the property without the permission of the caveat loan provider.

Can a property be sold if it has a caveat?

Given that a caveat is legally protected, it cannot be sold nor used in other transactions. You can only sell it once the caveat is removed.

What documentation do I need for a caveat loan?

Each lender will differ regarding the documentation required to secure a caveat loan. Common requirements include business and personal bank statements, tax returns, business financial statements, business plan, certificate of incorporation and other business legal documents. The good news is that we only require your most recent council rates notice and your most recent existing mortgage statement when considering your loan application.

How long does it take for a caveat loan to get approved?

Processing times for a caveat loan largely varies among lenders. Here at Mango Credit, an application gets approved usually within 24 hours, and funding is typically available within 3-5 days from the approval of the application.

How do I apply for a caveat loan?

Different lenders have varying business loan application requirements and processes. It’s easy to apply for a loan with us: you can submit an enquiry by phone, email or apply online. Upon receiving your enquiry or application, we email an indicative quote that details the interest rates, costs, loan structure and document requirements. If you agree with the proposal, we then issue a formal and more detailed letter of offer. You return the signed proposal with the required documents, and we ask our solicitors to issue security documents or order a valuation if needed. Once we receive the security documents, we settle by electronic transfer of funds. Click here to apply for a short-term caveat loan.

Get started! Contact us today.

We offer short-term caveat loans, as well as fast first mortgages, second mortgages, home equity loans and business loans. And you can quickly and easily apply online.

Key takeaway
If you own a property, even if it is the subject of a first mortgage, a caveat loan can be a fast and relatively cost-effective source of short-term funds for personal or business use. You can apply online for a caveat loan. Caveat loans in Australia can be used for a short period of time (2 to 36 months) for a variety of purposes.

How a caveat loan can help you overcome a short term cash flow crunch. Read more >