Caveat loan rates: what sets the price of your loan

Search for caveat loan rates and you’ll find plenty of headline numbers. What you won’t find is a rate that tells you what your loan will cost. That’s because a short-term property-secured loan isn’t priced off a menu. It’s priced off a file, and two files that look alike from the outside can price quite differently once the details are known.

This page explains how that pricing is worked out: the inputs, why advertised figures drift away from real quotes, and how to make sure the number you’re offered is the sharpest one your situation can support. For the fee side of the ledger (establishment, legal, valuation, discharge) see what short-term loans cost. This page sticks to interest and price.

What interest rate will I pay on a caveat loan?

The honest answer is that it depends on your circumstances, and anyone who quotes you a number before seeing the property, the title and the exit is guessing.

We don’t publish a rate card. Every caveat loan we write on Victorian property, and every short-term registered second mortgage we write in other states, is priced on the facts of that deal. Once our credit team understands the security and the plan to repay, you get a written quote showing the cost in dollars. That’s the figure that matters, because it’s the one you’ll actually pay.

What decides the price of a caveat loan?

Interest is, in the words of business.gov.au, “the cost to borrow money” (business.gov.au). On a short-term private loan, that cost reflects how much risk and work sits in the deal. These are the seven inputs that move it.

Price driver	What sharpens the price	What pushes it up
Combined LVR (all debt on the property against its value)	Plenty of equity left after every loan	Borrowing close to the property’s limit
Title position	First mortgage, or a second position with a cooperative first lender	A crowded title or an existing lender in arrears
Property type and location	Standard houses and units in established suburbs	Vacant land, specialised or remote property
How long the money is needed	A short, clearly defined window	An open-ended “until things settle down”
Strength of the exit	A signed contract, an approved refinance or a confirmed payment	A hoped-for sale or a refinance not yet applied for
How clean the file is	Clear title, complete documents, honest disclosure	Surprises found halfway through
Urgency	Time to value and settle in the normal course	Settlement needed within hours, out of hours

The cost of money in the wider market also plays a background role. The Reserve Bank publishes its cash rate target, which it describes as “the interest rate on unsecured overnight loans between banks”, and funding costs across the industry move with it. But on a short-term secured loan, the seven file-level factors above have far more influence on your quote than the cash rate does.

Combined LVR is usually the biggest single input. If you want to see how it’s worked out on your property, our page on how equity is calculated walks through it, and the LVR calculator gives you a quick read.

Why don’t advertised “from” rates match the quote you get?

Because a “from” figure describes the best possible file, not a typical one. It assumes low LVR, prime metropolitan property, a first-ranking position and a watertight exit. Very few borrowers arrive with all four, so very few are offered the headline.

There are other reasons the gap appears:

• The headline leaves things out. Establishment fees, prepaid interest and line fees may sit outside the advertised figure.
• Monthly and annual quotes look different. Some private lenders quote per month and others per year. You can’t compare them by eye, and multiplying one by twelve doesn’t tell you the dollars you’ll pay once fees and the interest method are included.
• The ad was written for a different product. A first mortgage figure says nothing about a caveat sitting behind a bank.

We’d rather not show a number that disappoints you later. A quote built on your actual property, title and exit is more useful than any brochure figure.

Is caveat loan interest charged monthly, prepaid or capitalised?

All three exist, and the choice changes how the price feels rather than what drives it.

• Monthly: you pay interest from cash flow as you go, and the full advance reaches you at settlement.
• Prepaid: interest for an agreed period is deducted at settlement, so there are no monthly payments but less cash on day one.
• Capitalised: interest is added to the balance and repaid at exit, so the loan has to be sized with room for it inside the equity.

Prepaid and capitalised interest suit businesses whose cash is tied up until the exit arrives. The trade-off is that the property’s equity carries the cost for the whole term. Our page on the caveat loan exit strategy covers how the interest method and the repayment plan fit together.

Want a priced structure for your own property? Start a quick enquiry and we’ll come back with real numbers.

How do you compare two caveat loan quotes fairly?

Turn both quotes into dollars over the same realistic term, then line them up:

1. Cash you actually receive at settlement.
2. Total interest in dollars for your expected exit date.
3. Every upfront fee in dollars.
4. Exit costs, including discharge and registry fees.
5. What one extra month would cost if the exit slips.
6. Any minimum interest period or early repayment cost.
7. How quickly each lender can genuinely settle.

business.gov.au puts it plainly: “Make sure you research different loan options and understand exactly what you’re signing up for” (business.gov.au). The lowest headline doesn’t always produce the lowest total, and a quote that can’t settle before your deadline costs you more than any price difference.

Illustrative example: same loan, two prices

Illustrative only. Round numbers, no real borrowers, no rates implied.

Two Victorian business owners each want $300,000 against their homes for 90 days or so.

• Owner A has a house worth about $1,400,000 with $500,000 owing to the bank. After the new loan the combined LVR sits near 57%. The exit is a commercial property sale that has already exchanged, with settlement booked.
• Owner B has a house worth about $800,000 with $280,000 owing. After the new loan the combined LVR sits near 73%. The exit is a bank refinance that hasn’t been applied for yet.

Same loan amount, same state, same structure. Owner A’s file carries more equity and a dated, contracted exit, so it supports a sharper price. Owner B can still borrow, and can narrow the gap by getting the refinance application underway before settlement.

How can you get a sharper price on a caveat loan?

You can’t change your property, but you can control a surprising amount:

• Firm up the exit. A signed contract, a refinance approval or a payment schedule in writing is worth more than anything else you can add.
• Borrow what you need, not the maximum. Lower combined LVR means less risk, which shows in the price.
• Bring the documents early. ID for every owner, rates notice, payout figure from your bank and a short note on the purpose.
• Disclose everything up front. Arrears, ATO debt or old defaults found late slow the file and add risk.
• Give us a little time where you can. Same day is possible for $20k to $250k, but a few days’ notice helps the valuation and documents run smoothly.

Dealing with the people who set the price also helps. We’re the lender, so there’s no broker in the middle adding a fee of their own.

Find out what your loan would cost

A price only means something when it’s built on your property and your plan to repay. That’s the conversation we’d like to have.

The enquiry form takes about 60 seconds and there’s no credit check when you first enquire. Your details stay with us rather than being sent to a queue of lenders, and someone from our credit team reads your situation and phones you to talk it through. Please answer accurately, especially the property address, the state it’s in, what’s owed on it and when you need the money. That’s what lets us price it properly the first time.

Get a quote on my file →