The short answer
A caveat loan and a second mortgage are both ways to borrow against property that already has a loan on it, without paying that loan out. With a second mortgage, the lender registers a mortgage on the title behind your existing first mortgage. With a caveat loan, the lender lodges a caveat on the title, which is a notice that it has an interest in the property, rather than registering a mortgage.
A caveat is often chosen when speed matters most and the need is short. A second mortgage is often chosen when the loan will run for several months and a registered security makes more sense. Equity Tap offers both, along with first mortgages, for business loans from $50k to $5m over one to twelve months.
How a caveat loan works
A caveat is a legal notice on a property title. It tells anyone dealing with the property that someone else has an interest in it. In practice, it means the property can't easily be sold or refinanced without the caveat holder being dealt with first. For a lender, that's protection. For a borrower, it means the lender can act quickly because there's less to put in place.
Caveat loans suit short, sharp needs: a tax bill due this week, a garnishee notice, a supplier demanding payment, a deposit that has to land before a deadline. More detail is on our caveat loans page.
How a second mortgage works
A second mortgage is a fully registered mortgage that ranks behind your first. If the property is sold or refinanced, the first lender is repaid first, then the second. Your existing first mortgage stays exactly where it is, with its current rate, repayments and terms. The first lender's consent may be needed before the second mortgage is registered.
Second mortgages suit needs that run a bit longer, and borrowers who want to keep a first mortgage they're happy with. Our guide to what a second mortgage is goes into more depth.
Side by side
| Caveat loan | Second mortgage | |
|---|---|---|
| What goes on the title | A caveat (a notice of interest) | A registered mortgage behind the first |
| Existing first mortgage | Stays in place | Stays in place |
| First lender's consent | Depends on the first mortgage terms | May be needed |
| Typical use | Very urgent, shorter needs | Needs running several months |
| Speed | Often the fastest option | Fast, consent can affect timing |
| Equity Tap loan size | $50k to $5m | $50k to $5m |
| Equity Tap term | One to twelve months | One to twelve months |
What they have in common with Equity Tap
Whichever security you use, the way we lend is the same:
- No valuations. We don't order a valuation before approval. You save time and the cost, and you don't have to leave the business to meet a valuer at the property.
- No financials. No tax returns, BAS, profit and loss, accountant's letter or bank statements for a property-secured loan. We need ID, property and mortgage details, the purpose and evidence of how you'll repay.
- No credit check at initial assessment. Bad credit history, defaults, ATO debt or a past decline are not automatically a problem.
- Flexible repayments. Interest only, or interest for up to the first six months prepaid or added to the loan so there are no scheduled payments in that period. Interest is not waived.
- Speed. Conditional approval can often be given on the phone and a term sheet issued in about 30 minutes once we have the scenario. Eligible loans can settle in as little as 24 hours.
How to choose
Ask yourself three questions:
- How soon do I need the money? If it's days, a caveat may be the quickest route.
- How long do I need it for? If it's a few weeks, a caveat often suits. If it's several months, a second mortgage is often the better fit.
- What does my first mortgage say? Some first lenders need to consent to a second mortgage. If that would be slow, ask us whether a caveat suits the timeline better.
You don't need to work this out alone. Tell us what you need and when, and we'll recommend the structure and explain why.
For example
For example, a retailer who needs to pay for a container of stock landing next week, and expects to repay from sales within two months, might suit a caveat loan. A builder who needs working capital to run a six-month project, and wants to keep a well-priced home loan in place, might suit a second mortgage. Both keep the existing loan untouched.
What about a first mortgage?
If your property has no loan on it, or you want to pay out an existing lender, a first mortgage business loan is usually the cleanest option. We lend on first mortgages too.
Talk it through
Each loan is priced on your individual circumstances, aiming for the sharpest rate available for your situation, with the full cost shown before you proceed. Call 1300 123 024 or apply online. If you'd like to read more first, try what is a private business lender or second mortgage business loans.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
What is the main difference between a caveat loan and a second mortgage?
Which is faster, a caveat or a second mortgage?
Do I have to refinance my existing home loan?
Do I need a valuation for either?
How much can I borrow?
Can I use a caveat loan for personal expenses?
Which one should I choose?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.