Caveat loans for property developers and builders

Builders and developers live by the program. Slab, frame, lock-up, fixing, handover. The money is meant to follow the same rhythm, but it rarely does. A head contractor pays three weeks late. A site you’ve been chasing comes up with a deposit due Friday. Two of eight townhouses are still sitting there when the construction loan falls due.

Those gaps are short, specific and usually covered by property you already own. That’s exactly what a caveat loan is built for. This page looks at how builders and developers use one, what a construction lender needs to agree to, and how the exit is judged.

Can property developers use caveat loans?

Yes, and they’re among the most frequent users, because their need tends to be temporary and their exit tends to be clear. Common uses:

• A deposit on the next site while the last project’s sales are still settling.
• A cost overrun the construction lender won’t top up.
• Consultants and holding costs while a permit is pending.
• Unsold stock at completion, when the construction loan needs repaying.
• Buying out a joint-venture partner before the project finishes.

We write caveat loans on Victorian property. For projects or homes in other states and territories, a short-term registered second mortgage does the same job and can usually be arranged just as quickly. Loans run from $20k to $5m, for business purposes only.

Many projects are held in a special-purpose company or a unit trust, and a builder’s yard is often owned by a family trust. That doesn’t rule anything out. The entity’s documents become part of the file, and the directors or trustees sign alongside it. Our page on property in a trust or company lists what we ask for, so you can have it ready.

If you’re after funding for a whole project stage rather than a gap, private development finance is the better starting point.

How do builders use a caveat loan to cover a progress claim gap?

A builder’s biggest cash pressure is the lag between paying out and getting paid. Wages are weekly, suppliers want payment on account terms, and progress claims can take weeks to arrive, or longer when they’re disputed.

Victoria’s Security of Payment Act is there to help. The state’s building regulator describes it as “a fast and inexpensive process to recover payments” due under a construction contract, and notes that amendments took effect on 15 April 2026 (Building and Plumbing Commission). Even so, recovering a claim takes time, and payroll doesn’t wait.

A caveat loan secured over the builder’s home, yard or an investment property closes the gap. The loan funds wages and materials now, and the progress payment repays it when it lands.

What the builder has	How it shapes the loan
A submitted progress claim with a due date	A clear, dated exit
A history of payments from that client	Makes the exit more believable
Equity in a home or yard	The security for the loan
A second claim due soon after	A back-up exit if the first runs late

Waiting on a payment and can’t wait any longer? Tell us about the claim and we’ll work out a structure.

Will my construction lender allow a caveat or second mortgage?

It depends on what the loan is secured against.

• Secured over the project site, behind the construction lender: you’ll usually need that lender’s written consent. Construction facilities are carefully controlled, and an unexpected caveat on title can cause problems with the facility.
• Secured over a different property, such as your home: the construction lender usually isn’t on that title, so its consent typically isn’t needed. Still, check your facility terms, because some restrict other borrowing by the developer or its directors.

To get consent quickly:

1. Ask early, in writing, with the amount, purpose and term.
2. Show where the money goes. If it funds the project, the construction lender often welcomes it.
3. Confirm the exit, so the lender can see you’ll be repaid ahead of or alongside them.
4. Give your contact at the bank our details so the lenders can talk directly.

Can I borrow against unsold stock or completed units?

Yes. Finished stock is often the most useful security a developer holds. A completed townhouse or apartment can be valued on a clear basis and sold or leased straight away.

There are two common ways to structure it:

• Clear the construction lender. A short-term first mortgage over the unsold units repays the construction loan, giving you time to sell properly.
• Sit behind it. Where the construction lender stays in place, a caveat (Victoria) or registered second mortgage (elsewhere) can unlock extra cash against the remaining equity, with consent.

Valuation matters a lot here. Our page on valuations for short-term loans explains what the valuer looks at.

Illustrative example: deposit now, sales later

Illustrative only. Round numbers, no real developer, no pricing implied.

A Werribee developer has finished four townhouses. Three are sold with settlements booked over the next eight weeks. Meanwhile a new site comes up with a $250,000 deposit due within days.

The developer’s home is worth about $1,300,000 with $450,000 owing. We write a caveat loan behind the home loan, which sits well inside the remaining equity, and the deposit is paid on time. The exit is the first two townhouse settlements, with the third as a back-up. The construction lender isn’t involved because its security isn’t touched.

What exit do lenders want from a developer?

The same thing we want from anyone: specific, dated and documented. For developers that usually means one of these:

• Exchanged sale contracts on completed stock, with settlement dates.
• A construction or residual stock facility that’s approved, or close to it.
• A progress or final payment under a signed building contract.
• A refinance of completed stock to a longer-term investment loan.

Planning timing deserves caution. Planning Victoria notes that “a permit is always subject to a time limit and will expire under specified circumstances” (Planning Victoria). An exit that depends on a permit should allow for realistic approval times. Our page on the caveat loan exit strategy covers how to build in a buffer and a back-up.

Got a gap in the program? Let’s close it

Developers and builders talk to us because a short gap is costing them a site, a crew or a sale price. We’re the lender, so you’re dealing with the people who decide.

The enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We don’t circulate your project to a crowd of lenders. Someone on our credit team reviews the security, the gap and the exit, then calls you. Please be accurate about the property you’re offering, the state it’s in, what’s owing on it (including any construction loan) and the date the money is needed.

Fund the gap in my project →