Caveat Loan

Caveat Loan

A caveat loan is a short-term loan that’s borrowed against the value of your property’s equity. The caveat is a document lodged onto a property title, which is a government ownership record. This secures the real estate, so that the lender is registered – in this way, it’s similar to a mortgage.

Where a caveat loan differs from a mortgage is the time frame and interest rate – the terms of lending are usually 1-3 months and involves a higher interest rate, as it is deemed riskier than a registered mortgage.

A caveat loan is usually quicker to access than a traditional mortgage, as it is set up as a short-term financing tool. It’s the business equivalent of what a payday loan would be to an individual. In the event of a default, the lender is able to repossess the property and liquidate to make up for any losses.

When you have a caveat loan, you usually can’t use the property as security against any other loan. You will also need to repay the loan in full before selling the property.