Refinancing a caveat loan or short-term loan: picking the next structure

Short-term loans are built around an exit — a sale, a refinance, a payment you’re waiting on. Most of the time the exit arrives as planned. Sometimes it doesn’t: a buyer’s finance falls over, a contract payment slips a month, an accountant is slower than promised. When that happens close to the due date on a caveat or short-term loan, refinancing is often the cleanest answer.

The real question isn’t whether to refinance. It’s which structure to move into and how quickly it can settle.

Why do owners refinance a caveat or short-term loan?

The reasons tend to fall into four groups:

• The exit is late. The property sale hasn’t settled, the bank refinance is taking longer, or the money you were waiting on hasn’t landed.
• More room is needed. The business needs a bit more working capital, and there’s equity to support it.
• Too many short-term debts. A caveat loan, an unsecured advance and an overdue supplier account, all on different dates, can often be rolled into one loan.
• A better fit. The original loan was arranged in a hurry, and now there’s time to pick a structure with a longer runway or a single due date.

Whatever the reason, the advice from business.gov.au holds: speaking to your creditors early can prevent late penalties. Talk to your current lender, and start the refinance conversation, before the due date arrives.

Which structure can I refinance into?

That depends on what’s on the title and where the property is.

Where you are now	Refinance option	When it fits
Caveat loan behind a bank loan (Victoria)	New short-term caveat loan	You only need more time, and want the bank loan left alone
Caveat loan behind a bank loan (Victoria)	Short-term first mortgage clearing both	You’d rather have one lender and one due date
Short-term second mortgage (any other state)	New registered second mortgage	More time needed, existing first loan stays
Several short-term debts	One first or second mortgage	Consolidating into a single repayment date

Caveat loans are written for Victorian property. If your current short-term loan is over property elsewhere, a registered second mortgage does the same job and is usually arranged just as quickly. Our page on short-term caveat loans explains how the caveat structure works in Victoria.

If the due date is close, tell us where things stand — the earlier we see it, the more options stay open.

How does a refinance actually settle?

It’s more mechanical than most people expect:

1. Get a payout figure from your current lender. It should show everything needed to clear the loan on a given date, including any discharge or exit costs.
2. New lender checks the property. A title search — which, as Land Use Victoria notes, shows mortgages, caveats and other encumbrances — plus a view on value.
3. Documents are signed by every borrower, owner and guarantor.
4. Settlement: the new lender pays the old lender directly. The old caveat is withdrawn, or the old mortgage discharged, and the new security goes on the title.

You don’t handle the payout yourself, and there’s no gap where the property is unsecured. Same-day funding is possible for refinances of $20k to $250k, and up to $5m is possible within 24–48 hours, when the file is straightforward.

Illustrative example: the sale that fell over

An illustration only — round numbers, no real client, no rates.

A Ballarat café owner took a $200k caveat loan over his investment house to fund a second site, planning to repay it when the house sold. The buyer’s finance collapsed three weeks before the loan was due. The house is worth about $900k and has a $350k bank loan on it.

Option A — new caveat loan. Refinance the caveat loan with another one of about $215k, covering the payout and costs, with a term long enough to relist and sell. The bank loan stays exactly as it is. Combined borrowing: about $565k, near 63% of value.

Option B — first mortgage over everything. A short-term first mortgage of about $570k pays out both the bank and the caveat lender. One lender, one due date, a similar overall LVR.

He chose Option A because he was happy with his bank and only needed time. An owner juggling several debts might choose B. Both work because the equity is there and the new exit — a relisted sale — is believable. Our exit date check is a quick way to test whether a new term leaves enough breathing room.

What should I avoid when refinancing?

A few habits make refinancing harder than it needs to be:

• Waiting until after the due date. Default or extension charges can make the payout figure bigger, and lenders see less time to work with.
• Refinancing into the same problem. If the exit is still uncertain, pick a term that reflects reality, not hope. Our page on waiting on a property sale covers realistic sale timeframes.
• Comparing only one cost. Look at the full cost of each path — payout costs, establishment, valuation and legal fees. Our page on what short-term loans cost breaks them down.
• Keeping the lender in the dark. A current lender who knows the refinance is coming is usually easier to deal with at payout.

Can I refinance with bad credit or an ATO debt?

Often, yes. A short-term refinance leans mainly on the equity in the property and the strength of the new exit, so a patchy credit file or an ATO debt is considered case by case rather than ruled out. What helps is being upfront: explain what happened, what’s being done about it, and how the new loan fits into the plan. Our page on bad credit caveat loans covers how we weigh this up.

Due date coming up? Start the conversation now

Refinancing goes best with a little runway, so the sooner you tell us, the better. The form takes about 60 seconds and there’s no credit check when you first enquire. Your details come to us, not to a queue of lenders, so you won’t be fielding calls from strangers. A real person looks at your current loan, the property and the new exit, and calls you to talk options.

Please be precise about the property, the state it’s in, what’s owing and the exact due date on your current loan. Those details decide which structure we’d recommend.

Get a refinance option →