Bridging finance vs Caveat loan
Bridging vs caveat lending in Australia: security position, speed, tenor, pricing. When each is the right structure for short-dated property-secured funding.
A bridging loan uses a registered first or second mortgage as security and runs typically 1-9 months. A caveat loan lodges a caveat on title rather than a registered mortgage, faster to set up (days vs weeks) but weaker security position, used for shorter and smaller files. Bridging is the better structure for most short-dated property-secured funding; caveat lending is a niche for genuinely urgent files where a registered mortgage can't be put in place in time.
Side-by-side
| Attribute | Bridging finance | Caveat loan |
|---|---|---|
| Security position | Registered first or second mortgage | Caveat lodged on title |
| Lender power of sale | Yes (under registered mortgage) | No (caveat blocks dealings, doesn't enforce) |
| Typical tenor | 1-9 months | 1-6 months |
| Typical rate | 6.99-9.99% p.a. | 12-24% p.a. |
| Typical fees | 1-2% establishment | 2-4% establishment |
| Time to settle | 1-3 weeks | 3-7 days |
| Max LVR (combined) | Up to 75% (first), 80% (combined second) | Up to 75% on equity in property |
| First-mortgagee consent required | Yes for second mortgages | Generally not required |
| Best for | Most short-dated property-secured needs | Urgent files where registered mortgage can't be settled in time |
- Settlement chain funding (sale + purchase timing gap)
- DA-hold periods before construction takeout
- Refinance gap between expiring facility and replacement
- Acquisition funding ahead of an underwritten sale
- Files where 1-3 weeks to settle is acceptable
- Genuinely urgent stamp duty / settlement-day shortfalls
- Short-dated working capital ahead of a contracted sale already in settlement
- Borrowers without time to register a second mortgage but with documented short-dated exit
- Files where the existing first-mortgage documentation prohibits a second
In practice
The legal difference between a bridging loan and a caveat loan is in the security position on title. A bridging loan registers a mortgage, first or second ranking, giving the lender power of sale and a clear position in the priority queue if anything goes wrong. A caveat loan lodges a caveat, which blocks dealings on the title but doesn't grant any direct enforcement right.
The practical consequence: caveat lenders charge significantly more because their position is weaker. Caveat loan rates in Australia typically sit at 12-24% p.a. with establishment fees of 2-4%, against bridging rates of 7-10% p.a. with establishment of 1-2%. The premium prices the weaker security.
Speed is the trade-off. A caveat can be lodged at the Land Titles Office in a day; a registered mortgage typically takes 1-3 weeks to settle through legal documentation, search, signing and registration. For files where the borrower has a genuinely short-dated cash need and the registered mortgage timeline doesn't work, caveat lending bridges the gap.
For most files, bridging finance with a registered mortgage is the right structure. The cost difference is large enough that the extra week to settle a registered facility almost always justifies the wait. Caveat lending is a niche solution, not a default, most experienced private credit firms (Archer Wealth included) don't run a caveat-only product because the risk-adjusted economics don't work for the lender in the way they do on registered mortgages.
When a broker raises caveat lending as the proposed structure, the first question is whether registered second-mortgage bridging would solve the same problem with better economics. Usually it will, with a one-week delay that's easier to absorb than the higher rate.
Frequently asked
- Can a caveat lender force the sale of the property?No. A caveat blocks dealings on the title, it stops the property being sold, refinanced or further encumbered without the caveator's consent, but it doesn't give the lender a direct power of sale. The lender's recourse if the loan isn't repaid is more limited than under a registered mortgage.
- Why are caveat loans so expensive?Because the security position is weaker. The lender has no direct enforcement right and has to negotiate or litigate to recover if the loan defaults. The higher rate and fees price that weaker position.
- Does Archer Wealth do caveat lending?No. Our short-dated products (Archer Flex bridging, Archer Rapid) use registered first or second mortgages. We've found that the risk-adjusted economics of caveat lending don't suit a firm of our scale, and most files presented as caveat-need can be solved with bridging at meaningfully better economics.
- Can a caveat be lodged behind an existing first mortgage?Yes, that's the typical structure. The caveat ranks behind the registered mortgage but in front of any subsequent unsecured creditor. First-mortgagee consent is generally not required to lodge a caveat (whereas a registered second mortgage typically does require it).