Bridging vs caveat loan — what's the difference?
A bridging loan is a registered first or second mortgage used to bridge a property purchase or sale. A caveat loan is secured by a caveat on title — faster to settle, but smaller amounts and shorter terms. Bridging suits larger, longer needs; caveat suits urgent, sub-$500K cash needs.
Quick comparison
| Feature | Bridging Loan | Caveat Loan |
|---|---|---|
| Security | Registered mortgage | Caveat on title |
| Typical amount | $100K – $10M | $20K – $500K |
| Typical term | 1 – 12 months | 1 – 6 months |
| Settlement speed | 5 – 14 days | 24 – 72 hours |
| Interest rate | 0.8% – 1.5% / month | 1.5% – 3% / month |
| Best for | Property purchase, settlement gap, development | Urgent cash flow, deposits, GST |
When a bridging loan is the right choice
Bridging loans suit anyone with a clear property exit strategy — usually the sale of an existing home, refinance to a long-term mortgage, or the completion of a development project. Because they sit as a registered mortgage, lenders are comfortable advancing larger amounts (often into the millions) at lower monthly rates.
Common scenarios include buying before selling, settling a Toorak or Brighton purchase before your existing home settles, or funding a renovation in the gap between contracts.
When a caveat loan makes more sense
Caveat loans are designed for speed. A caveat can be lodged on title in hours rather than weeks, so funds can clear in 24–72 hours. The trade-off is cost (rates roughly double bridging), smaller loan sizes, and the consent of any first mortgagee — which isn't always given.
They suit short, sharp needs: a stamp duty shortfall the day before settlement, an unexpected GST bill, or topping up a deposit when an opportunity appears mid-week.
Cost comparison on a $300K, 3-month loan
- Bridging: ~$9,000 interest (1.0% × 3 months) plus ~$3,000 establishment.
- Caveat: ~$18,000 interest (2.0% × 3 months) plus ~$2,500 establishment.
For larger amounts or longer terms, the cost gap widens dramatically — a $1M caveat for 6 months can cost $60K+ more than a comparable bridging loan.
How to decide
Ask three questions: How fast do I need it? How much do I need? Will the first mortgagee consent? If you need under $500K in 48 hours and the first mortgagee says no to a second registered mortgage, caveat is your only path. Otherwise, bridging is almost always cheaper and cleaner.
Talk to us about your settlement bridging or business bridging scenario — we'll model both options against your actual exit timeline.
People Also Ask
Generally no. A caveat lodged without consent risks being removed by the first mortgagee. Most lenders require written consent before settlement, which can take 5-10 business days and may be refused.
Speak to us →Interest may be deductible if the loan funds an income-producing investment, business activity, or commercial property. Owner-occupied bridging typically isn't deductible. Always confirm with your accountant.
Yes. Many borrowers use a caveat to settle quickly, then refinance into a cheaper bridging loan once the registered mortgage is in place. We regularly structure this two-step approach.
Get in touch →Where this applies in Melbourne
See how this strategy plays out in the suburbs where we most often arrange this kind of finance.
Related insights
Winning a Toorak Auction: A Finance Playbook
Toorak moves fast. Pre-approved bridging finance is the difference between bidding with confidence and walking away.
Settlement Gap Survival Guide for Melbourne Property Owners
When your sale settles after your purchase, settlement bridging keeps the deal alive without panic refinancing.
LVR Explained: How Bridging Lenders Calculate Loan-to-Value
LVR drives how much you can borrow. Bridging lenders calculate it differently from banks — here's the full picture.