Brokers place these two structures against the same kind of file, which is how they came to be spoken about interchangeably. A client needs capital quickly, there is equity in a property, and the first mortgagee is either unwilling to move or too slow. From the borrower's side the two look almost identical. From the lender's side they are different instruments with different protections, and that difference decides what a lender will advance and on what terms.
This page sets out what each one is, how they differ where it matters, and how Archer uses them. The full legal treatment, including how recovery works on each and the consent position, is published separately and linked below rather than repeated here.
Caveat and second mortgage, compared
The distinction that matters is between recording a claim and holding a registered security interest. Everything else follows from it.
A caveat
- What it is. A notice lodged with the land titles office recording a claimed interest in the property.
- What it does. Prevents dealings being registered without the caveator being notified, which in practice stops a sale or refinance completing until it is addressed.
- What it does not do. It does not by itself create a power of sale. It protects a claimed interest; it is not a substitute for holding a registered mortgage.
A second mortgage
- What it is. A mortgage registered on title, ranking behind the existing first mortgagee.
- What it does. Creates a registered security interest with a defined position in the priority order and its own enforcement rights.
- What it requires. Usually the consent of the first mortgagee, which is a real step in the timetable rather than a formality.
The mechanics of each, including the recovery position and where consent is and is not required, are set out in full in this caveat loan compared with a second mortgage. That page is the reference version; this one summarises it.
What is a caveat loan?
A caveat loan is lending where the lender's security is a caveat lodged on the borrower's title rather than a registered mortgage. The appeal is procedural: lodging a caveat is a lighter step than registering a mortgage, so the structure is often presented as the faster route to funding.
The trade-off sits on the lender's side, and it flows back to the borrower through price. A caveat records a claim; it does not confer the enforcement path a registered mortgage does. A lender holding only a caveat is in a weaker position if the file goes wrong, and lending priced for that weakness is not cheap lending. That is the reason a caveat-only structure is usually the more expensive way to solve a problem that a registered second mortgage would also solve.
It is also worth separating the instrument from the timetable. Speed on a short-dated file comes mostly from how quickly a lender can form a view on the security and the exit, not from which instrument goes on title. A registered second mortgage on a clean file, with the first mortgagee cooperative, is not materially slower than a caveat.
What is a second mortgage?
A second mortgage is a registered mortgage sitting behind an existing first. The first mortgagee retains priority: on a sale or enforcement, they are paid out before the second mortgagee sees anything. The second mortgagee accepts that subordinate position in exchange for a registered interest and a defined place in the queue.
For the borrower, the practical advantage is that the existing first mortgage stays where it is. There is no need to refinance a facility that may be well priced, may carry break costs, or may simply be working. Capital is raised against the equity above the first mortgage without disturbing it.
The step that governs the timetable is the first mortgagee's consent. Some lenders deal with a second mortgage request as routine; others are slow, or decline as a matter of policy. That is usually the longest pole in the tent on a second mortgage file, and it is worth establishing early rather than discovering late.
How Archer uses each
Archer Wealth writes registered first and second mortgages. A caveat is used as additional security, taken alongside one of those facilities where the structure of the deal calls for it. Archer does not write standalone caveat loans.
That is worth stating plainly, because a broker arriving here from a search for caveat lending is often looking for exactly that: a caveat-only facility, quoted and settled as its own product. It is not something Archer offers, and it is better to say so on this page than after a client has been taken through an application.
Where a file is presented as a caveat need, it is generally written as a registered second mortgage instead. In practice a caveat taken at the outset often converts to a second mortgage once the first mortgagee's consent is in hand, which is another way of saying the second mortgage was the destination all along. Where both structures are genuinely available on a file, Archer prefers the registered second mortgage: a stronger position for the lender is a better-priced facility for the borrower.
Facility sizes start at $250,000 for a first mortgage and $100,000 for a second. Rates, LVR bands by security type and the establishment fee are published in full on the rate card for brokers placing property-secured deals, rather than restated here where they would drift out of date.
One boundary is worth naming. Archer lends for business and investment purposes. Consumer-purpose lending regulated under the National Consumer Credit Protection Act, a family buying a home to live in, is outside what private lending is for and outside what Archer writes. A broker with an NCCP file is better served elsewhere, and that is a faster answer than an application.
Which structure suits which file
For a broker weighing a file, the useful questions are about the security position rather than the instrument.
- Is there a registered first mortgage, and will that lender consent? A cooperative first mortgagee makes a registered second mortgage straightforward, and that is the better-priced structure.
- Is there a documented exit? Short-dated property lending is underwritten on the exit, whether that is a contracted sale, a refinance with a term sheet, or a defined business event. A file without one is difficult under any structure.
- Is the timing constraint real, or assumed? A caveat is often reached for on the assumption it is the only fast option. On a clean file with a cooperative first mortgagee, that assumption usually does not hold.
Where the comparison is between a short-dated facility and a bridge rather than between two second-ranking structures, this bridging finance compared with a caveat loan sets out the difference. The broader picture of how private lenders Australia approach property-secured files sits on the main lending page.
Common questions
Is a caveat loan the same as a second mortgage?
No. A caveat records a claimed interest on title; a second mortgage is a registered security interest ranking behind the first. They often get used against the same kind of file, which is where the confusion comes from, but the lender's position differs and so does the pricing that follows from it.
Does a second mortgage need the first mortgagee's consent?
Usually, and it is the step that most often governs the timetable. Some first mortgagees treat the request as routine, others are slow, and some decline as a matter of policy. It is worth establishing the first mortgagee's position early in the file rather than late.
What happens to a caveat when the property is sold?
The caveat has to be dealt with before the dealing can be registered, which in practice means the caveator is paid out or agrees to withdraw at settlement. That is the mechanism that makes a caveat useful as security: it does not stop a sale happening, it stops one completing without the claim being addressed.
Is a caveat cheaper than a second mortgage?
Generally the opposite. A caveat leaves the lender in a weaker enforcement position than a registered mortgage, and lending priced for that weakness costs more, not less. Where both structures are available on a file, the registered second mortgage is usually the better-priced one.
Is a caveat faster than registering a second mortgage?
Lodging a caveat is a lighter procedural step, but speed on a short-dated file comes mostly from how quickly a lender can form a view on the security and the exit. On a clean file with a cooperative first mortgagee, the difference in timetable is smaller than the difference in cost.
Can a caveat be lodged over any property?
Only where there is a genuine interest to protect. A caveat lodged without a proper basis can be challenged and removed, and lodging one improperly carries its own consequences. The legal detail, including the grounds and the removal process, is set out on the full comparison page linked above.
Run the deal past the credit team
The fastest way to find out whether a file works is to put the shape of it in front of the credit team rather than reason about instruments in the abstract. Security type, position, the approximate numbers and the exit are enough for an indicative view. Every file is assessed on its own merits and subject to credit approval.
Submit a scenario and the credit team will come back with a view on structure as well as price.
Caveat loans Sydney
Sydney generates more caveat loan enquiries than any other Australian market, driven by the high property values, the depth of the auction market and the speed at which deals turn. A typical Sydney scenario: a borrower has exchanged at auction with a tight unconditional date, the bank cannot settle in time, and a short- dated facility against an existing Sydney property bridges the gap. Eastern suburbs, lower north shore and inner-west security all settle cleanly because the secondary market is deep and valuation panels are responsive.
Sydney files run through accredited brokers with credit decisioned out of Bondi Junction. Most short-dated Sydney files are written as a registered first or second mortgage rather than a caveat-only structure, for the reasons set out above. See caveat loans in Sydney for the full city overview.
Caveat loans Melbourne
Melbourne caveat scenarios cluster around the bayside upgrade chain (Brighton, Hampton, Toorak feeding inner-east acquisitions) and the delayed-settlement files Melbourne is known for. The common shape: a sale is contracted with a longer settlement window than the acquisition, and a short-dated facility against existing equity covers the gap. The Melbourne credit lens calibrates to local market behaviour, slightly tighter LVR envelopes on apartments reflecting the apartment cycle, slightly longer assumed discharge windows, but otherwise the same structuring as the rest of the national book.
As with Sydney, files presented as a caveat need are generally written as registered first or second mortgages. See caveat loans in Melbourne for the full Melbourne overview, or caveat loans, full explainer for the structural detail.