If you own a home or an investment property with equity, you can usually borrow against it fast without refinancing your existing loan. The two products you’ll hear about are second mortgages and caveat loans. They sound similar, and in some ways they are, but where you live and what you need the money for will usually settle the choice for you.
Key takeaways
- Both loans are secured against property you (or a guarantor) already own, not against the value of a build.
- Caveat loans are only written in Victoria. Everywhere else, a second mortgage is the standard choice.
- Your existing first mortgage stays in place with either option.
- Both can fund in as little as 24 hours in some cases, with terms typically 1 to 12 months.
- Neither needs financials or cash flow records, and bad credit is considered.
What is a second mortgage?
A second mortgage is a loan registered on your property’s title behind the first mortgage you already have. Your bank keeps first position. The second lender sits behind it and is repaid from whatever equity is left if the property is ever sold.
For builders and tradies, the big advantage is that you tap your equity without touching your main home loan. There’s no need to break a fixed rate or go through a slow bank refinance. It’s the most common secured product we arrange, and it works in every state and territory. Our fast second mortgage page covers how it’s used for building businesses.
What is a caveat loan?
A caveat loan is secured differently. Instead of registering a mortgage, the lender lodges a caveat on the property’s title. A caveat is a formal notice that records the lender’s interest, so the property can’t simply be sold or refinanced without that interest being dealt with.
Caveat loans are designed for short, sharp needs where speed matters. We only write them in Victoria. If you’re a Victorian builder, see our page on caveat loans for builders.
Second mortgage vs caveat loan: side by side
| Second mortgage | Caveat loan | |
|---|---|---|
| Where we write it | All states and territories | Victoria only |
| How it’s secured | Registered mortgage behind your first mortgage | Caveat lodged on the property’s title |
| Existing home loan | Stays in place | Stays in place |
| Loan size | $20,000 to $5 million | $20,000 to $5 million |
| Speed | As little as 24 hours, usually a few days | As little as 24 hours, usually a few days |
| Term | Typically 1 to 12 months | Typically 1 to 12 months |
| Financials needed | No | No |
| Common uses | Materials, wages, ATO debts, completing a build, bridging a gap | Urgent short gaps, deposits, bills that can’t wait |
Which one should a builder choose?
For most readers the answer is simple.
- You’re outside Victoria. Go with a second mortgage. It does everything a caveat loan would do for you.
- You’re in Victoria and the need is small and urgent. A caveat loan may be the neater fit.
- You’re in Victoria and the loan is larger or runs longer. A second mortgage is often the better structure. Our lending team will tell you which suits.
- The property has no existing loan. Neither may be needed. A fast first mortgage could be the cleaner option.
The property’s location is what counts, not where your business is based. A Melbourne builder offering a property in Albury would be looking at a second mortgage because the security is in New South Wales.
What do lenders look at for either loan?
Because these loans are secured against existing property, the questions focus on the property and your plan, not your tax returns:
- Equity. What the property is worth versus what’s owed on it now.
- Property type and location. Houses, units, commercial property and land with equity are all considered.
- Who owns it. You, your company, a trust or a guarantor such as a family member.
- Purpose. What the money is for. Loans are for business or investment purposes.
- Exit. How you’ll repay, such as a progress claim, a sale, a refinance or incoming payments.
Credit history matters less than you might think. Past defaults or an ATO debt don’t automatically rule you out, which is why builders turned away by a bank often end up here.
Example: a Victorian builder with an urgent materials bill
Example only. A builder in Ballarat has a frame and truss delivery booked for Monday and the supplier wants payment up front. He needs a hypothetical $60,000 for a few weeks until his lock-up claim is paid. He owns his home with a small bank loan on it.
Because the property is in Victoria and the need is small and short, a caveat loan could be arranged over the home without touching his bank loan. He repays it when the lock-up payment lands.
Example: a New South Wales builder covering two jobs
Example only. A small builder in Newcastle is running two duplex builds and a client has fallen behind on payments. She needs a hypothetical $350,000 for six months to keep trades on site. She owns an investment unit with solid equity.
A caveat loan isn’t an option in New South Wales, so a second mortgage over the unit is arranged instead. No financials are needed, and her exit is a mix of overdue client payments and her next progress claims.
Can you have both a second mortgage and a caveat?
Generally you’d use one or the other over a single property. If you need more than one property’s equity, a lender may take security over two properties, which can increase the amount you can borrow. Our lending team will structure it so you’re not paying for more than you need.
What does it cost?
Every loan is priced on your circumstances. Our lending team shops the loan with specialist lenders to find the sharpest rate available for your situation. The best way to keep the cost down is to borrow only what you need, for only as long as you need it, with a clear exit.
Key facts
- Loan size: $20,000 to $5 million
- Security: existing property owned by you or a guarantor
- Speed: as little as 24 hours in some cases
- Term: typically 1 to 12 months
- Caveat loans: Victoria only; second mortgage in all other states and territories
- Suits: builders and tradies with equity who need money fast without refinancing
Next step
If you want to understand the mechanics in more detail, read how a second mortgage works. If you’re ready to go, see if you qualify in 60 seconds. Enquiring won’t affect your credit score and a lending specialist will call to talk through which option fits.
