What is a Caveat? Caveats vs Mortgages

By: Aaron Robbins0 comments

Caveat loans are becoming a popular way for business owners and property developers to access fast finance for a range of different funding needs.

Since July 2020, lending to small and medium-sized businesses has driven non-residential building purchases up by 118%.

It’s safe to say that business finance is booming, with caveat loans becoming a popular way for business owners and property developers to access fast finance for a range of different funding needs.

They’re known for their flexibility as a fast finance option, but there is often little known about what a caveat means and the difference between caveat and mortgages as a type of loan security.

Let’s unpack what a caveat is and how it’s different to mortgages when it comes to securing a loan.

What is a caveat loan?

Firstly, a caveat loan is a business loan that uses your real estate property to secure funding for a range of business purposes.

Accessing the available equity in an owned property means that you can afford to prepare for a property sale, to achieve debt consolidation, pay a large, one-off bill, such as an ATO payment or even inject cash into your business to boost your cash flow.

Fast caveat loans get their name because at Diverse Funding Solutions, caveat loans can be funded in as little as 48 hours!

When you apply for a caveat loan with DFS, we offer a hassle-free process thanks to our flexible lending criteria.

This is a luxury we can afford to provide to you, thanks to being one of Australia’s top private lenders.

Private lending means that we don’t need to worry about a formal property valuation, revenue forecasts, bank statements, or even your credit history.

Short term caveat loans rely on a loan process of setting repayment schedules and an exit strategy, rather than satisfying convoluted lending criteria.

Some bank loans can take weeks or months to get approved or put you through a pre-approval application process first.

Caveat loans settle faster than most other loans in Australia, especially a home loan.

How are fast caveat loans secured?

A caveat loan places a legal caveat on the title of your property as a registered form of security to the loan.

Caveats vs mortgage

How caveat loans work is by using a property that you own as security to lend you money, which is also how a mortgage works — so it’s little wonder why some people get confused between the two.

What is a legal caveat?

A caveat is a legal instrument that is used to essentially notify third parties that the person or company lodging the caveat (the ‘Caveator’) has an interest in whatever they’re lodging the caveat on!

In the case of caveat loans, the interest is in ‘real property’ (house, land, etc).

The caveat not only marks the lender’s interest in your property, but also prevents you from dealing with property without the consent of the caveator (which, in this case, is the lender).

What this means for someone with a caveat loan, is that they can’t sell or transfer the property without first gaining the consent of Diverse Funding Solutions.

Good to know: Overseas properties operate under a different legal jurisdiction to Australia, which is why we can’t accept overseas properties for your caveat loan.

How is a caveat different to a mortgage?

The fundamental difference between a caveat and a mortgage is that a mortgage is more enforceable than a caveat, which means that the the person or lender who holds the mortgage on the property has the right to sell or repossess the property if you default on the loan.

Another key difference is that with a mortgage, the lender (in this instance referred to as the mortgagee) actually holds the Title Deed to the property.

When people quip that the ‘bank owns their home’ this is what they’re referring to!

While a mortgagee holds the title deed for a property, a caveat sits over the title behind a mortgage — which is why a caveat loan lender doesn’t need to gain permission to place a caveat on a property already secured by a first mortgage.

This is the reason why we can offer you a short term caveat loan even if there’s an existing mortgage on your property!

A caveat doesn’t provide the lender with the right to sell or transfer the property to repay the loan in the event that the borrower defaults, which is why at DFS, we set a viable exit strategy and a suitable repayment schedule.

Top Tip: before submitting your caveat loan application, please seek legal or financial advice if you feel your business needs it. At Diverse Funding Solutions, we offer excellent customer service but can’t offer legal advice.

The benefits of using short term caveat loans

Business owners all over Australia are realising what property developers have known for years — that caveat loans are a fast and flexible way to meet your business finance needs.

Cash flow

One of the biggest benefits to small business operators is the ability to unlock equity in a property to boost their business’ cash flow.

Being a short term loan makes caveat loans a great solution for almost every business purpose that needs a cash injection.

You might even look to use a caveat loan in conjunction with the Government cash flow boost that could be coming your way.

Fast and easy approvals

In the business world, your time is money.

That’s why we are proud to get you funds quickly; quicker than almost all other loan types, in fact!

Your small business can’t wait for a complicated pre-approval process, so our application process doesn’t include the typical requirements for a business loan.

When you apply for a caveat loan with DFS, there are no credit checks, forecasts of revenue or valuations required.

No hidden fees

A caveat loan is proudly hidden-fee free! Unlike some home loans, you can get a caveat loan with confidence, knowing that caveat loans are transparent and upfront with any and all fees associated.

Save interest

Interest rates are a hot topic, which is why we’re excited to let you know that at Diverse Funding Solutions, we have some of the most competitive caveat loan interest rates available on the market.

The interest rate that is applicable to your loan could be as low as 0.77% per month.

Accessible with bad credit

Private funding gives us the opportunity to assess your application without needing to rely on your credit file.

The path to business success often comes with a few bumps, which is why when we loan you money, we rely on a repayment schedule and strategy to repay the loan, rather than sifting through your credit history.

Diverse Funding Solutions is one of Australia’s top private lenders and provides caveat loans to many Aussies businesses with bad credit.

Flexible Loan Amount & Loan Terms

It’s easy to access the loan amount you need for a caveat loan; sufficient funding is made possible with sufficient equity in your security property!

We will provide you with up to 75% of the equity in your property.

If you own your property outright, with no mortgages or second mortgages, then you could access 75% of your total property value.

At DFS, we’re also keen to provide you with a loan term that suits you.

Our loan terms are typically 12 months in length, but we are happy to devise terms relevant to your individual needs.

At Diverse Funding Solutions, business loans are our speciality, which is why we have made caveat lending our forte.

Avoid being let down by other lenders, and access competitive interest rates, a flexible loan term and speedy loan approval for your business finance needs with DFS — simply fill in your details, and our professional team will contact you shortly!

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