Bridging, Caveat or Second Mortgage: Which One Do You Need?
Structure Choice
Business owners and investors · Property-secured finance · Comparison guide
These three get compared on speed and cost, which is the least useful comparison available. The real difference is legal structure: what each one registers, what it actually secures, and what a lender has to do to realise it if you default. This guide sets the three side by side from the statutes and the case law, and covers the enforcement asymmetry almost nobody writes about.
Quick Answer
A second mortgage is registered and carries a statutory power of sale. A caveat loan registers nothing: it protects an unregistered equitable mortgage that generally needs a court order to enforce. Bridging is a purpose, not a security type, and is delivered through one of the other two.
| Your question | Short answer |
|---|---|
| What is the actual difference? | Registration. A second mortgage is registered and ranks by order of registration. A caveat registers nothing and protects an unregistered equitable interest. Bridging is a funding purpose, not a security type, and is delivered through one of the other two. |
| Is a caveat a kind of mortgage? | No. It is a recording that restricts other dealings, and only so far as they would affect the interest claimed in it. The security behind it is an equitable mortgage created by the loan documents. |
| Does a caveat stop my bank selling? | Generally no, where the bank's mortgage was already recorded or lodged in registrable form before the caveat. Both New South Wales and Queensland say so in terms. It does buy you notice of the sale in New South Wales. |
| What changes if the lender registers? | Enforcement. A registered mortgagee can serve a default notice and exercise a statutory power of sale. An unregistered one cannot sell the first mortgagee's interest, so it generally has to go to court. |
| Do I need the bank's consent? | For a registered second mortgage, in practice almost always, because your first mortgage will require it. For a caveat nothing is being registered, which is the main reason the process is shorter. |
| How is bridging different? | It is the only one of the three that is inherently about two properties or two facilities rather than one. Lenders size it on peak debt while both are held and end debt once the outgoing one goes. |
| Which one is regulated? | None of them by structure. The National Credit Code turns on who the borrower is and what the money is for, and it does reach loans to individuals for residential investment property. |
| Which one is right for me? | Usually decided by whether your timeline can absorb a registration and a consent, whether the exit is a sale, a refinance or a re-approval, and how much of the equity is already committed. |
What is the difference between bridging finance, a caveat loan and a second mortgage?
Also called: bridging loan, bridge finance, commercial bridging finance (bridging); caveat lending, caveat finance (caveat loan); second charge, 2nd mortgage (second mortgage).
One is a funding purpose and two are security structures, and mixing those categories is where most of the confusion on this topic starts. Bridging finance describes what the money is for, carrying a borrower across the gap between two events. A caveat loan and a second mortgage describe how the lender is secured. That is why a bridge is often delivered as a caveat loan or as a second mortgage rather than instead of one, and why comparing all three on interest rate produces a comparison that does not mean anything.
The difference that does the work is registration. A second mortgage is lodged and registered against the title, and once registered it takes its place in a queue set by statute. A caveat is not a security instrument at all: it is a recording that restricts the registration of other dealings, and it does so only to the extent that they would affect the interest claimed in it. Behind the caveat sits an equitable mortgage or charge created by the loan documents, and that unregistered interest is what the lender actually holds. Everything else that differs between the two, the consent, the paperwork, the cost, the enforcement path, follows from that one structural fact.
| Feature | Bridging finance | Caveat loan | Registered second mortgage |
|---|---|---|---|
| What it is | A funding purpose, not a security type. No statutory definition exists in Australia | A loan secured by an unregistered equitable mortgage, protected by a caveat on title | A loan secured by a mortgage registered behind an existing first mortgage |
| Registered on title? | Depends entirely on the structure used to deliver it | No. The caveat is a recording, not a registered interest | Yes. Priority runs by order of registration |
| First mortgagee consent | Follows the structure chosen | Usually not required to lodge, because nothing is being registered | In practice almost always, because the first mortgage requires it |
| Number of securities in view | Typically two: an outgoing and an incoming property or facility | One property, one caveat | One property, ranked behind the existing lender |
| How the lender enforces | Whatever the underlying structure permits | Generally by asking a court for an order for sale of the equitable charge | By default notice, then the statutory power of sale |
| What repays it | The second event: a sale, a settlement or a refinance | A defined short-term exit, usually a refinance or a sale | A refinance, a sale, or amortisation over the term |
| Where it usually fails | The end debt does not stand up once the outgoing asset goes | The exit slips and there is no registered position to fall back on | Consent does not come, or the combined position leaves no equity |
Read down the enforcement row, because that is the row the rest of this guide is built on. It is also the row that competitor comparisons leave out, and the one that matters most when something goes wrong. For the two-way version of this comparison, focused on price, consent and speed rather than legal structure, our note on the second mortgage versus caveat loan decision covers it, and the caveat loans guide covers that product on its own terms.
Which one does your situation need?
Which one you need is usually decided by two things you do not control: how much time the transaction has, and how much of the property's equity is already committed. It is rarely a preference. If a registration and a consent can fit inside your timeline, a registered second mortgage is the stronger position for both sides, because it is enforceable under statute rather than through a court. If they cannot, a caveat-secured facility is the structure that survives the timeline, and the trade you are making is a weaker enforcement position for the lender, which is priced.
Points toward a registered second mortgage
- The timeline can absorb a consent request and a registration
- The term is measured in months rather than weeks
- The first mortgagee is a lender that grants consent as a matter of course
- There is enough equity that a ranked position is genuinely worth something
- The exit is a refinance or a staged sale rather than a single dated event
Points toward a caveat-secured facility
- The deadline will pass before a consent could realistically be obtained
- The first mortgage documents make consent slow or unlikely
- The term is genuinely short and the exit is a single dated event
- The amount is small relative to the equity, so the lender's risk sits in timing
- You accept the higher cost that a weaker security position carries
Bridging sits across both columns rather than beside them. If the situation involves two properties or two facilities, the question becomes which of the two structures delivers the bridge, and that is decided the same way. Before you decide anything, pull a current title search from your state land registry: it shows every registered mortgage and every lodged caveat on the property, and it is the document both this page and any lender will be working from.
What is a caveat, and what does it actually do on your title?
A caveat does not freeze a title, and it is not a security: it is a recording that restricts other dealings on the title only so far as they would affect the interest claimed in it. The most widely repeated claim about caveats is the opposite, and it is worth correcting before anything else. In New South Wales the caveat provisions say the caveat does not prohibit the recording of a dealing "except to the extent that the recording of such a dealing ... would affect the estate, interest or right claimed in the caveat" (Real Property Act 1900 (NSW), section 74H(1)(b)). The restriction is measured against the interest claimed, not against the title as a whole.
More importantly, a caveat generally does not stop a prior registered mortgagee selling. Section 74H expressly carves out, in relation to a mortgage or charge "recorded or lodged in registrable form before the lodgment of the caveat", a dealing effected by that mortgagee "in the exercise of a power of sale". Note the limit: the carve-out is keyed to a mortgage that was already recorded or lodged in registrable form when the caveat went on, not to mortgagee sales generally. Queensland reaches the same result in its own words, exempting from a caveat's effect an instrument executed by a mortgagee whose interest was registered before the caveat was lodged, where the mortgagee has power under the mortgage to execute it and the caveator claims its interest as security for payment of money or money's worth (Land Title Act 1994 (Qld), section 124(2)(c)). Two states say it in terms. If a lender or an article tells you a caveat blocks your bank from selling over the top of it, that is not the law in either of them. The New South Wales land registry publishes an information sheet on exactly this question, and it goes one step further than the statute: a caveat claiming under an unregistered mortgage or loan agreement does not merely fail to prevent the mortgagee's transfer, it is removed from the title when that transfer is registered, without any application or fee.
What a caveat does buy, and this is genuinely useful, is information. In New South Wales a first mortgagee that wants to exercise its power of sale must serve a copy of its default notice on "each caveator ... who claims as an unregistered mortgagee or chargee to be entitled to an estate or interest in the land" (section 57(2)(b1)(ii)). The caveat does not buy you security. It buys you notice, and notice is what gives a junior lender time to act.
Caveats also lapse, on clocks that differ by state and that are easy to transpose incorrectly. In New South Wales the caveator has 21 days after service of the Registrar-General's notice to both obtain a Supreme Court order extending the caveat and lodge that order (section 74J). Missing the lodgement limb is as fatal as missing the application.
Queensland gives 14 days after service of a notice, or otherwise three months after lodgement, and while a caveat lodged by or with the consent of the registered owner is normally outside that regime, the exemption is clawed back where the lot is subject to a mortgage and the caveat's grounds concern registration of the mortgage or the mortgagee's power of sale, which is precisely the situation described here. In Victoria a caveat lapses 30 days after the Registrar's notice that a transfer or dealing has been lodged, which is the mechanism that operates when a mortgagee sells. The positions in other states and territories are not stated on this page because they were not verified for it.
The clearest statement of what a caveat is worth as security does not come from a lender. It comes from the Queensland land registry's own practice manual, which warns that "as a caveat does not provide all of the benefits of the Torrens System and the Land Title Act 1994, it should not be seen as a viable alternative to registering the interest" (Land Title Practice Manual, Part 11, updated 1 August 2025). That is the registry describing the instrument, not a competitor describing a rival product, and it is the single most useful sentence available on this comparison.
One more asymmetry that nothing in the field seems to mention. If a caveat is lodged without reasonable cause, Queensland reverses the onus: it "must be presumed that the caveat was lodged or continued without reasonable cause unless the caveator proves that it was lodged or continued with reasonable cause", and exemplary damages are available (Land Title Act 1994 (Qld), section 130). The New South Wales compensation provision contains no equivalent presumption. Do not assume the two states treat an aggressive caveat the same way.
If a caveat is not a security, what is the caveat lender actually holding?
An equitable mortgage or charge, created by the loan documents rather than by the caveat. The caveat is the marker that protects it on the register; the charge is the thing being protected. That distinction sounds academic until a default happens, at which point it decides how the money gets recovered, and it is the reason this structure prices differently from a registered one.
The leading Australian authority on how an equitable charge over Torrens land is realised is King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441. The Court's summary of the mechanism is short: "an order for judicial sale is the standard way of enforcing an equitable charge" ([2005] NSWSC 1076 at [81]). A lender in this position asks a court to order a sale. It does not send a notice and appoint an agent.
There is a widely repeated shorthand that an equitable mortgagee has no power of sale, and it is too strong for New South Wales. The same judgment held that the statutory power of sale in the Conveyancing Act 1919 (NSW), section 109 does attach to the interest of an unregistered second mortgagee of Torrens land, and that since the amendments made by the Conveyancing (Covenants) Amendment Act 1986 it is no longer a requirement, for that power to exist, that the mortgage be made by deed. So the power can exist. The reason it does not help is different, and it is the sharpest point on this page.
The problem is what the power can reach. Section 109 "does not enable an unregistered second mortgagee of Real Property Act 1900 land to sell the interest of the first mortgagee in the land", and, as the Court put it, "a sale of the land subject to the interest of the first mortgagee is unlikely to prove attractive to potential purchasers". The statute itself draws the line: a sale under the statutory power conveys the property "freed from all estates, interests, and rights to which the mortgage ... has priority, but subject to all estates, interests, and rights which have priority to the mortgage" (section 112(1)). Hence the conclusion: if the second mortgagee wanted to sell the entire interest in the land, "it needed to obtain a court order authorising it to do so".
Two further features of that route are worth knowing before you accept a facility secured this way. The court's jurisdiction to order a sale exists, but it is exercised as a matter of equitable discretion rather than as of right: the judgment is explicit that further consideration must be given to "the circumstances in which, and terms on which, it is proper to make such an order", and cites an earlier case in which the circumstances did not justify making one. And the prior mortgagee generally has to be joined to the proceedings, on the ordinary principle that a person whose rights will be affected by an order should be a party to the proceedings in which it is sought. A court-ordered sale is a proceeding with other parties in it, not an administrative step.
Queensland now says something close to this in statute rather than leaving it to construction. Under the Property Law Act 2023 (Qld) a court asked to order the sale of an equitable mortgage of land may create and vest a legal interest in the mortgagee so it can carry out the sale as if the mortgage were a legal one, but any such order "is without prejudice to any mortgage having priority to the equitable mortgage unless the mortgagee consents to the sale". Different jurisdiction, different route, same answer: the prior mortgagee's position is not something a junior equitable lender can sell through.
What does a registered second mortgage give a lender that a caveat does not?
A place in a statutory queue, and a power it can exercise without a judge. Those are the two things registration buys, and between them they explain the whole price difference between the two structures.
The queue is set by statute and it is blunt. Registered dealings affecting the same estate or interest "shall, notwithstanding any notice (whether express, implied or constructive), be entitled in priority the one over the other according to the order of registration thereof and not according to the dates of the dealings" (Real Property Act 1900 (NSW), section 36(9)). Read it twice, because two things in it surprise people. The date on the loan documents is irrelevant. And knowing about someone else's unregistered interest does not cost you your priority.
What registration does not do is transfer the property. A mortgage "has effect as a security but does not operate as a transfer of the land mortgaged or charged" in New South Wales; in Queensland a registered mortgage "operates only as a charge" on the lot; in Victoria it has effect as a security "and be an interest in land, but shall not operate as a transfer". Three jurisdictions, three formulations, one substance, which makes it a safe national statement, though the Victorian wording is genuinely different from the Queensland one and should not be quoted interchangeably.
| Right or feature | Caveat over an equitable mortgage | Registered second mortgage |
|---|---|---|
| Statutory priority by registration | No. Nothing is registered, so section 36(9) does not rank it | Yes. Ranks by order of registration, regardless of notice |
| Statutory power of sale under the Real Property Act | No. That power is available only to a registered mortgagee | Yes, once the default notice requirements are met |
| Statutory power of sale under the Conveyancing Act | Possibly, but it cannot reach the first mortgagee's interest | Not needed; the Real Property Act route applies instead |
| Can sell the whole interest in the land | Not without a court order where a prior mortgage exists | Yes, subject to interests with priority over it |
| Court order required | Generally yes, and the remedy is discretionary | No, for the power of sale itself |
| Prior mortgagee joined to proceedings | Generally yes, which adds time and cost | Not applicable |
| Entitled to notice of a first mortgagee's sale | Yes, as a caveator claiming as an unregistered mortgagee | Yes, as a registered mortgagee of lesser priority |
| Visible encumbrance requiring formal discharge | A caveat, withdrawn or lapsed | A registered mortgage, formally discharged |
Reading that table as a borrower rather than a lender is instructive. The column that gives the lender less is the column that costs you more, and the column that gives the lender more is the column that puts a third party's consent on your critical path. There is no version of this where you get both.
How does a lender actually enforce each one if you default?
A registered second mortgagee serves a default notice, waits out the statutory period, and then exercises a power of sale conferred by the Act. An unregistered lender behind a caveat starts a proceeding and asks for an order. Follow those two paths side by side and the whole cluster makes sense: one path is administrative and runs on a clock; the other is litigation and runs on a court list.
On the registered path, the notice provision and the power are two different sections and they are routinely conflated. In New South Wales the power of sale is in section 58, headed "Power to sell". Section 57 sets the preconditions to exercising it, and it is available only to a registered mortgagee: the subsection opens "A registered mortgagee, chargee or covenant chargee may". The notice must allow compliance "within one month after service of the notice (or, where some other period exceeding one month is limited by the mortgage, charge or judgment ... within that other period)". Two qualifiers follow from that wording. One month is a floor, not a fixed period, and a mortgage can lengthen it but not shorten it. And notice can be dispensed with by express agreement in the mortgage only for non-monetary defaults; the Act specifically excludes default in payment of principal, interest or other money from that dispensation.
Queensland and Victoria run different clocks, and the differences are not cosmetic. Queensland's is the most borrower-protective of the three and it comes from a new Act: a mortgagee must give a notice requiring the default to be remedied "within 30 days after the notice is given to the mortgagor", and that requirement "applies despite any agreement to the contrary" (Property Law Act 2023 (Qld), section 114). Note two precision points that most secondary material gets wrong. The power of sale is in section 113, and section 113 is subject to contrary agreement while section 114 is not. And the Property Law Act 2023 commenced on 1 August 2025 and repealed the Property Law Act 1974, so material citing the 1974 Act on Queensland mortgage enforcement is citing a repealed statute.
Victoria is the one most often stated incorrectly, because it is not one period but two. Default must continue "for one month or such other period as is therein expressly fixed" before a notice can be served (Transfer of Land Act 1958 (Vic), section 76), and then a further period must run after service before sale: "if within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge" the default is not remedied, the power arises (section 77). Both limbs can be varied by the mortgage, and unlike the New South Wales provision, the Victorian text does not require a substituted period to exceed one month. So "Victoria requires one month's notice" is wrong twice over. Victoria does add something the others do not: the power must be exercised in good faith and having regard to the interests of the mortgagor.
| State | Default notice before a registered mortgagee can sell | Can the mortgage vary that period? | How a caveat comes off |
|---|---|---|---|
| New South Wales | At least one month after service of the notice, and only a registered mortgagee can use the provision at all | Yes, but only to a longer period exceeding one month. Notice can be dispensed with by express agreement for non-monetary defaults only | 21 days after service of the Registrar-General's notice, within which the caveator must both obtain a Supreme Court order and lodge it |
| Queensland | A notice requiring the default to be remedied within 30 days after the notice is given to the mortgagor | No. The requirement applies despite any agreement to the contrary, unlike the implied power of sale itself | 14 days after service of a notice, or otherwise three months after lodgement, with an exemption for owner-lodged caveats that is clawed back in mortgagee sale cases |
| Victoria | Two successive periods: default must continue for one month before notice, then a further month after service | Yes, and either limb can be varied. Victoria does not require a substituted period to exceed one month | 30 days after the Registrar's notice that a transfer or dealing has been lodged, which is the mechanism in a mortgagee sale |
| Regulated credit, any state | At least 30 days from the date of the notice before enforcement, under the National Credit Code | No, although a small set of statutory exceptions removes the notice requirement altogether | Not applicable. The Code governs enforcement of the credit contract, not the caveat regime |
Two cautions on reading that table. The periods are statutory floors and standard-form positions, and your own mortgage may lengthen them, so the document outranks the row. And the caveat column describes how a caveat ends, not how a caveat lender recovers, which is the separate and slower process covered above. The other states and territories are not shown because their positions were not verified for this guide.
Two lenders sit behind the same bank on the same commercial property. One took a registered second mortgage; the other took a caveat over an equitable mortgage. The borrower's exit slips and both go unpaid. The registered second mortgagee serves its default notice, runs the statutory period, and is in a position to sell subject to the bank's prior interest. The caveat lender cannot do that: its power, if it has one, cannot convey the bank's interest, and a sale subject to the bank's mortgage will not attract buyers, so it has to commence a proceeding for an order for sale, join the bank, and persuade a court that an order is appropriate. Same commercial position, same property, same default. Two entirely different recovery timelines, and the cost of the slower one was priced into the loan at the start. Illustrative only; every file turns on its own facts and documents.
The legislated notice periods, in four figures
- 1 monthis the minimum period a New South Wales default notice must allow a borrower before a registered mortgagee may exercise the statutory power of sale. The qualifier: this is a floor, and a mortgage may fix a longer period exceeding one month, but not a shorter one. Real Property Act 1900 (NSW), s 57(3)(d), read August 2026.
- 30 daysis the period a Queensland notice must give to remedy the default, running from when the notice is given rather than from the default. The qualifier: this one applies despite any agreement to the contrary, so it cannot be contracted away. Property Law Act 2023 (Qld), s 114, commenced 1 August 2025.
- Twoseparate one month periods apply in Victoria, one before the notice can be served and one after it. The qualifier: both are defaults that the mortgage can vary, and Victoria does not require a substituted period to exceed one month. Transfer of Land Act 1958 (Vic), ss 76 and 77, read August 2026.
- 30 daysis the minimum a default notice must allow, from the date of the notice, where a loan is regulated by the National Credit Code. The qualifier: business purpose credit generally sits outside the Code, so this protection is one of the things a business borrower gives up. National Credit Code, s 88, Compilation No. 52, 1 July 2026.
General information only, not financial advice and not legal advice. These are statutory notice periods and standard-form positions, not statements about your loan; your mortgage documents and the applicable state legislation govern.
What is bridging finance, and how do peak debt and end debt work?
Bridging finance is short-term finance that carries a borrower across the gap between two property or funding events, and no Australian statute defines it. The absence is the interesting part. The only official description is the regulator's consumer glossary, which calls it "short-term finance that covers the period between buying a new property and selling your existing property" (ASIC MoneySmart). That is a market term with an official gloss, not a defined legal category, and the practical consequence is that a bridging facility is whatever its documents make it. The security underneath is what determines your rights, not the word on the term sheet.
The official gloss is also framed around a homeowner buying before selling, and that is worth naming rather than inheriting. A business borrower's bridge is usually not a house move. It is a settlement that has to happen before a sale completes, a facility that expires before a refinance lands, or an asset that has to be acquired before another is realised. The mechanics are the same; the borrower, the purpose and the regulatory position are not.
What genuinely separates bridging from the other two structures is arithmetic rather than law. It is the only one of the three that is inherently about two positions. Lenders typically describe the sizing in two figures: peak debt, the combined exposure while both the outgoing and the incoming property are held, and end debt, the residual once the outgoing property is sold or refinanced. That is bank product vocabulary rather than a regulator's term, so treat it as market language, but it is the right frame, because a bridge is underwritten on the reduction rather than on the peak. The question a credit team is really asking is not whether you can service the peak. It is whether the end debt stands up on its own if the outgoing sale takes longer or lands lower than you expect.
A business owner needs to settle on a new premises before the existing one sells. During the overlap both properties are held and both carry debt, which is the peak. Once the old premises sells, the proceeds retire part of the facility and what remains is the end debt, which has to sit comfortably against the new property on its own terms. If it does, the bridge is a timing solution and the exit is a refinance onto a normal commercial facility. If it does not, the bridge is being used to fund a shortfall rather than a gap, and the sale of the old premises will not fix it. That is the distinction a lender is testing, and it is why an exit that depends on a price rather than on a date gets probed hardest. Illustrative only; no outcome, cost or approval is implied.
Because bridging is a purpose rather than a structure, the choice between the two structures in this guide still has to be made underneath it. A short, dated bridge with a single exit event often gets delivered on a caveat; a longer bridge with a staged exit is usually better as a registered second mortgage, if the timeline can carry the consent. Switchboard places both, and the private lending page sets out where commercial bridging sits in the wider structure, with the definitional detail on the commercial bridging finance entry.
Do you need your first mortgagee's consent?
For a registered second mortgage, in practice almost always, and it is the variable that moves your timeline more than anything else on the file. The requirement is contractual rather than statutory: your first mortgage will contain a term requiring the lender's consent before a further encumbrance is registered, and a second mortgagee will want that consent documented before it advances. Since certificates of title were abolished and conveyancing moved fully electronic on 11 October 2021, a second mortgage in New South Wales can generally reach the register without the first mortgagee's consent being lodged with it, so the obligation now lives in your loan contract rather than at the registry: registering without the consent your documents require is a breach of your facility, not a defect in the registration. Neither the statute nor your broker can shorten a step that belongs to a third party.
What the statute does instead is set the ranking, and the ranking is not the same question as the consent. Priority runs by order of registration and not by the dates of the instruments, and notice of another interest does not disturb it. That rule can then be varied by agreement, and in New South Wales the variation is given registrable effect by a memorandum of postponement: a registered mortgage with priority can be postponed to another, and the memorandum cannot be registered at all where an intervening registered mortgagee has not joined in it (Real Property Act 1900 (NSW), section 56A).
One more priority rule matters once a second lender is actually behind you, and it is the one borrowers never hear about: further advances. If your first mortgagee lends you more money after it has notice of the second interest, the general rule, from the House of Lords decision in Hopkinson v Rolt (1861), is that the new lending cannot be tacked onto the first mortgage's priority. The first mortgagee's priority is capped at what was owing when it learned of the second interest, and advances made after that point rank behind it. The rule is qualified differently around the country: Victoria deals with further advances in section 94 of its Property Law Act 1958, and Queensland's provision now sits in sections 125 and 126 of the Property Law Act 2023, not in the repealed 1974 Act that most commentary still cites. The practical consequences run both ways. A second lender will usually notify the first mortgagee precisely to fix that cap, which is one quiet reason consent gets documented even where registration no longer requires it. And a borrower planning to draw more on an existing bank facility after taking a second mortgage should assume the bank's position on further advances changes the moment it learns a second lender is on the title.
One framing correction that matters, because the term is used everywhere as though it were a legal category. There is no statutory definition of a "deed of priority" anywhere in Australian law. It is a contractual instrument that lenders use to record an agreed ranking between themselves. Priority itself is set by statute, and the contractual rearrangement is what gets registrable effect through the postponement machinery. If a term sheet refers to a deed of priority, the right question is what the document actually says about ranking, standstill and enforcement, not what the label implies. Our note on bank consent and priority documents works through how that plays out on a live file.
For a caveat-secured facility the consent question mostly disappears, because nothing is being registered, and that is the honest reason the process has fewer moving parts. It does not disappear entirely: taking a caveat over a property may still breach a term of your existing facility, so the position depends on your documents rather than on the register. Whether a lodgement would breach a facility you have already signed is a legal question for a solicitor, not something a broker can answer. And the caveat lender's position remains the weaker one, which is the trade being made. Where consent is the binding constraint on your file, the second mortgage and private mortgage lender pages set out the practical routes.
Why do the three price so differently?
Price follows recovery position, and recovery position follows everything covered above. A lender that can serve a notice and sell is in a fundamentally different place from one that has to commence a proceeding, join the senior lender and persuade a court, and that difference is the largest single input into what a facility costs. Everything else on a pricing sheet is smaller than the structural point.
This guide deliberately does not publish rate bands. Indicative pricing on this kind of finance is lender-specific, moves, and is a function of the file rather than the product, so a number here would be less useful than the list of things that actually move it. What follows is the composition instead.
What you will actually see is a term sheet, and its vocabulary is worth knowing before it arrives. Expect an establishment fee, and expect the offer to distinguish the gross facility from the net advance, the amount that actually reaches you at settlement after fees and any prepaid or capitalised interest are deducted. Expect a minimum interest period on short-term facilities, a higher default rate if the facility goes into arrears, an extension fee if the exit slips past the term, and a discharge or withdrawal fee at the end. None of these is a reason not to proceed. All of them are reasons to price the whole cost of the money rather than the headline rate, and to ask every lender for the net advance in writing.
| Cost component | Bridging | Caveat loan | Second mortgage |
|---|---|---|---|
| Interest, and how it is charged | Often capitalised across the overlap, so it accrues on the peak | Usually capitalised over a short term rather than paid monthly | Can be capitalised or serviced depending on the facility |
| The recovery position being priced | Follows whichever structure delivers it | Weakest of the three: enforcement generally needs a court | Stronger: statutory power of sale after a default notice |
| Legal and documentation | Two securities often means two sets of work | Loan documents plus lodging and later withdrawing the caveat | Mortgage documents, consent, registration and discharge |
| Third party consent cost | Follows the structure | Usually none, since nothing is registered | The first mortgagee's own consent fees and conditions |
| Valuation | Frequently both properties, not one | Sometimes limited or dispensed with on short terms | Generally required, on the security being ranked |
| What lengthens the term, and the cost | The outgoing sale slipping, which extends the peak | Any delay to a single dated exit | Consent delays before settlement, refinance delays after |
| Exit and discharge | Payout on sale or refinance, then release of both securities | Payout, then withdrawal of the caveat | Payout, then formal discharge of the registered mortgage |
The row worth arguing about with a lender is the second one, because it is the only one that is really about you. A file with a clean, dated, documented exit is a different credit risk from one with an intention, and that is the part of the pricing you can actually influence.
What do lenders check: loan to value ratio, exit strategy and serviceability
Assessment on all three structures runs on the same three questions, weighted differently. How much of the property's value is already committed, whether the exit strategy survives contact with reality, and whether the borrower can carry the facility while the exit happens. On short property-secured finance the second question does most of the work, which is not how borrowers usually expect it to go.
What makes a file fundable
- An exit tied to a date and a document, not to an intention
- Headroom in the loan to value ratio after all existing debt is counted
- A clear business purpose that matches how the funds are actually used
- Evidence the first mortgagee will consent, where consent is needed
- A borrower who has already priced the interest cost of a delayed exit
What gets a file declined
- An exit that depends on achieving a price rather than meeting a date
- Existing debt that leaves no realistic recovery behind the senior lender
- A stated purpose that does not match the flow of funds
- A term too short to complete the exit it is supposed to fund
- A structure chosen for speed when the real problem is the amount
From the broker's desk
Four patterns from working these files, offered as observations rather than as rules, and deliberately without figures:
- The exit decides which structure, and it decides it before price does. A single dated event points one way and a staged exit points the other, and that assessment usually settles the question before anyone has quoted anything.
- First mortgagee consent moves the timeline more than any other variable on the file. It sits with a third party, it is a commercial decision rather than an entitlement, and it is the most common reason a well-structured second mortgage becomes a caveat instead.
- What gets these declined is usually the exit, not the security. An exit that turns on achieving a price rather than meeting a date gets probed hardest, because that is the assumption that fails.
- Every one of the three is really underwriting the same thing. Not the property, not the borrower's history, but whether the repayment event survives contact with reality, and what happens to everyone if it slips.
Indicative general observations only, as at August 2026, based on broking experience. Not a quote, not an offer, not a statement of any lender's policy, and not an indication that any application will be approved. Every application is assessed on its own facts and on lender policy at the time. Assessment criteria vary by lender and change.
Which of these is regulated, and what protection do you give up?
None of the three is regulated or unregulated by virtue of its structure, which is the first thing to get straight. The National Credit Code turns on who the borrower is and what the money is for. It applies where the debtor is a natural person or a strata corporation and the credit is provided wholly or predominantly for personal, domestic or household purposes, or to purchase, renovate or improve residential property for investment purposes, or to refinance such credit (National Credit Code, section 5).
That second limb is where a common and expensive error lives. "It is an investment property, so it is not regulated" is false. Credit to an individual to purchase, renovate or improve residential property for investment purposes is caught, and the Code presumes a contract is covered unless the contrary is established. Where purpose is mixed, the test is predominance, meaning more than half.
Genuine business purpose credit generally sits outside the Code, and a business purpose declaration is the usual mechanism for establishing that. It is a presumption, not a switch. A declaration is ineffective if, when it was made, the credit provider or a prescribed person "knew, or had reason to believe", or "would have known, or had reason to believe, if the credit provider or prescribed person had made reasonable inquiries about the purpose for which the credit was provided", that the credit was in fact to be applied wholly or predominantly for a Code purpose. In 2025 the Federal Court applied that provision against a business lender and a loan introducer, imposing penalties totalling $515,000, and characterised the test as a hypothetical and counterfactual evaluation of what reasonable inquiries would have elicited rather than as a free-standing duty to investigate (ASIC 25-301MR, 12 December 2025).
This is also the point at which to say plainly what the business purpose route is not. It is not a way to structure around consumer protections. The regulator has separately commenced proceedings alleging that a lender used a corporate borrower structure to avoid the Code across up to 47 loans totalling over $37 million between March 2019 and October 2023. Those are allegations, not findings, and no judgment exists. But they mark the line: a declaration that reflects the real purpose is ordinary practice, and a structure designed to make consumer credit look commercial is not.
What you give up when a loan is genuinely business purpose is concrete, and it is worth pricing. The regulated path carries a mandated default notice allowing at least 30 days from the date of the notice to remedy the default before enforcement, with a small set of exceptions. Business purpose credit does not have that. What remains is the state mortgage legislation covered above, and the general prohibitions: lenders that provide only commercial loans need no credit licence and are not legally required to be members of the external dispute scheme, but the ASIC Act still prohibits unconscionable conduct, misleading or deceptive conduct, and unfair terms in standard form small business contracts (ASIC INFO 207).
External dispute resolution deserves its own sentence, because the common summary of it is wrong in a way that matters. The binding condition is membership, not size. AFCA defines a small business as "an organisation with less than 100 employees", and cannot consider a complaint about a small business credit facility above an indexed threshold, currently $6.3 million for complaints lodged on or after 1 January 2024 (AFCA). Note that the $5 million figure still circulating, including on some older pages, is the unindexed base rather than the operative limit. But none of that reaches you at all unless the lender is a member, and a purely commercial private lender need not be. Confirm membership on AFCA's public financial firm register before you sign; AFCA no longer issues membership certificates, so the register is the only reliable verification.
For context rather than alarm, the private credit market that funds much of this lending is estimated at "around $200 billion, or about 3 per cent of the size of the Australian banking system" (APRA System Risk Outlook, 21 May 2026). Separately, and on a different denominator, the Reserve Bank notes that "despite the strong growth in their lending, non-bank lenders still only account for 6 per cent of financial system assets, limiting their systemic importance" (Financial Stability Review, March 2026). The regulator has also put the sector on notice ahead of 30 June 2026 valuations, observing that "tighter liquidity, emerging borrower stress and signs of credit deterioration are testing valuations, governance and investor disclosures", and stating that poor practices in private credit "remain a 2026 enforcement priority" (ASIC, 18 June 2026). Read together, those tell a borrower to diligence the lender, not to avoid the market.
How fast does each one settle, and what actually decides that?
Settlement timing on property-secured finance is set by the slowest dependency on the file, not by the product, which is why this guide gives you the dependency list rather than a day count. Every comparison of these three leads with day counts, and quoting a number for a structure rather than for a situation gives a borrower false confidence about the one thing they most need to plan around. What is worth knowing is the ranked list of dependencies.
- Third party consent. If a first mortgagee's consent is required, that is almost always the longest pole, because it belongs to an organisation with its own queue and its own credit process.
- Registration. A registered second mortgage requires lodgement and registration; a caveat requires only lodgement. That is a genuine structural difference in the number of steps, and it is why the caveat route exists.
- Valuation. Whether one is required, and whether one or two properties are involved, often sets the floor. A bridge with two securities is two valuations, not one.
- Documentation and legal review. Company or trust borrowers, guarantors and multiple securities each add work, and the work is sequential rather than parallel.
- Information from you. The most common cause of a slow file is an incomplete one. What a lender is waiting for is usually already in your possession.
The practical implication runs the other way from how the question is usually asked. If your deadline is genuinely close, the useful move is not to hunt for the structure with the shortest advertised turnaround; it is to eliminate dependencies, which usually means choosing the structure that removes the consent step and having the file complete before you start. Where a specific settlement date is the constraint, our guide to finance for a fast settlement deals with that trigger directly. No timeframe is promised on any facility.
How do you exit or discharge each one?
In every case the money is repaid first and the security is released second, and the release is not automatic. Getting out is the step borrowers plan least and lenders assess most, and the mechanics differ enough between the three that they are worth setting out separately.
A caveat
The caveat is withdrawn once the facility is repaid, and the underlying equitable mortgage is released with it. A caveat can also come off without your involvement: it can lapse if the caveator does not meet the statutory deadlines described above, and it can be removed on application, so a caveat is a less stable position than borrowers assume, which cuts both ways. If a caveat remains on your title after payout, that is a discharge that has not been completed rather than a legal complication, and it is worth checking rather than assuming. Where a caveat facility needs to become a longer position rather than be repaid outright, converting a caveat loan to a second mortgage is its own process, with the consent step arriving at conversion rather than at the start.
A registered second mortgage
Repayment is followed by a formal discharge of mortgage, which has to be lodged and registered before the title is clear. Where a memorandum of postponement was registered to rearrange priority, the position on title reflects that arrangement until it is dealt with. Because the encumbrance is registered and visible, a second mortgage that has been repaid but not discharged will show up in any subsequent transaction, so the discharge is part of the exit rather than an afterthought to it.
Bridging
The exit is the point of the structure rather than the end of it. The outgoing property is sold or refinanced, the proceeds reduce the peak, and what is left is the end debt, which either sits on the incoming property under a new facility or is repaid outright. Two things go wrong here in practice: the sale takes longer than the term, or it lands lower, and both are reasons a lender tests the end debt on its own merits rather than accepting the peak as temporary.
Across all three, the same discipline applies. Confirm in writing what the payout figure includes, confirm who lodges the release and when, and confirm the title is clear afterwards rather than assuming that repayment did it. If your exit is a refinance, start it before the current facility is close to expiry: a facility that expires while its replacement is in assessment is a materially worse position than one that is refinanced early, and it is a self-inflicted one.
Bridging finance, a caveat loan and a second mortgage are usually compared on speed and cost, and that comparison hides the thing that actually differs. A second mortgage is registered, ranks by order of registration, and carries a statutory power of sale after a default notice. A caveat registers nothing: it protects an unregistered equitable mortgage, it generally cannot stop a prior registered mortgagee selling, and enforcing it usually means asking a court for an order for sale, which is a discretionary remedy. Bridging is not a legal category at all; it is a purpose delivered through one of the other two, sized on peak debt and underwritten on end debt. Which one your situation needs is decided by whether your timeline can absorb a consent and a registration, whether one property is involved or two, and how well the exit stands up. Work out the exit and the consent position first, and the structure will usually pick itself.
Key takeaway: the caveat and the second mortgage often sit in the same commercial position but they are not the same instrument, and the difference only shows up when something goes wrong, which is exactly when it is too late to change it.Frequently Asked Questions
A second mortgage is registered on the title and a caveat is not, and that single difference drives everything else. A registered second mortgage takes its priority from the order of registration and gives the lender a statutory power of sale once a default notice has run its course. A caveat is a recording that restricts the registration of other dealings, and only to the extent that they would affect the interest the caveat claims. It is not itself a security. The security sitting behind a caveat is an equitable mortgage or charge created by the loan documents, and enforcing that normally means asking a court for an order for sale rather than exercising a power of sale directly. So the caveat is better understood as a protective marker over an unregistered interest than as a junior version of a mortgage.
You grant the lender an equitable mortgage or charge over the property in the loan documents, and the lender lodges a caveat on the title to protect that unregistered interest. Because nothing is registered, the lender does not need the first mortgagee to consent to a registration, which is the main reason the process has fewer moving parts than a second mortgage. What you should understand before signing is what the lender is actually holding and what it has to do to realise it. The caveat does not give the lender a power of sale, and it does not stop a prior registered mortgagee selling over the top. Caveats also lapse: in New South Wales the caveator has 21 days from service of the Registrar-General's notice to both obtain a Supreme Court order extending the caveat and lodge it, and Queensland and Victoria run different clocks again.
Three downsides, and the first one is procedural rather than financial. A second mortgage generally needs the first mortgagee's consent to register, which puts a third party you do not control on your timeline, and consent is a commercial decision rather than an entitlement. Second, you are adding a registered encumbrance to the title, which is visible, has to be formally discharged, and constrains what you can do next with the property. Third, ranking behind a first mortgage means the second mortgagee is exposed to whatever the first mortgagee does, and if the first mortgagee sells, the second mortgagee's recovery comes out of what is left. The trade for accepting those is real: registration is what converts the lender's position from an interest it has to litigate into one it can enforce under statute.
No, and treating them as the same thing is the most common error in this area. They often sit in the same commercial position, behind a bank, over the same property, for a short term, which is why they get used interchangeably in conversation. Legally they are different instruments with different enforcement paths. A second mortgage is registered and carries a statutory power of sale; a caveat is a recording that protects an unregistered equitable interest and carries no power of sale at all. The Queensland land registry puts the practical consequence better than any lender does, warning that because a caveat does not provide all of the benefits of the Torrens system and the Land Title Act, it should not be seen as a viable alternative to registering the interest.
In practice almost always, because your first mortgage will contain a term requiring it, and a second mortgagee will want the consent documented before it advances. This is a contractual question rather than a statutory one. What the statute does is set priority: registered dealings rank by order of registration and not by the dates of the instruments, regardless of notice. Priority can then be rearranged by agreement, and in New South Wales that rearrangement is given registrable effect by a memorandum of postponement, which cannot be registered at all if an intervening registered mortgagee has not joined in it. Note that there is no such thing as a statutory deed of priority: that phrase describes a contractual document, not a legal category.
Generally no, and this is the single most important correction on this page. In New South Wales the caveat provisions expressly do not prohibit the recording of a dealing effected by a mortgagee exercising a power of sale, where that mortgage was recorded or lodged in registrable form before the caveat was lodged. Queensland says the same thing in its own terms for an instrument executed by a mortgagee whose interest was registered before the caveat, where the mortgagee has that power and the caveator claims its interest as security for money. So a caveat lodged behind an existing bank mortgage does not freeze the title against that bank. What it does do is buy you information: in New South Wales a selling first mortgagee must serve a copy of its default notice on each caveator claiming as an unregistered mortgagee.
It is a real product and a real market term, but it is not a defined legal category. There is no Australian statute that defines bridging finance, and the only official description is the regulator's consumer glossary entry, which calls it short-term finance that covers the period between buying a new property and selling your existing property. Two things follow. Nobody can tell you what a bridging loan legally is, only what a particular facility's documents say it is, so the security structure underneath matters more than the label on top. And the official description is framed around a homeowner buying before selling, which is not the position most business borrowers are in. A commercial bridge is usually about a settlement, a facility expiry or an asset transition rather than a house move.
Short-term property-secured finance that carries a business across the gap between two events, where the repayment comes from the second event rather than from trading income. The structural feature that separates it from the other two options on this page is that bridging is inherently about two positions rather than one: an outgoing property or facility and an incoming one. Lenders typically describe the sizing in terms of peak debt, the combined exposure while both are held, and end debt, the residual once the outgoing asset is sold or refinanced. That is bank product vocabulary rather than a regulator's term, but it is the right frame, because a bridge is underwritten on the reduction rather than on the peak. If the end debt does not stand up on its own, what is being proposed is not really a bridge.
It depends on the borrower and the purpose, not on which of the two structures is used. The National Credit Code applies where the debtor is a natural person or strata corporation and the credit is wholly or predominantly for personal, domestic or household purposes, or to purchase, renovate or improve residential property for investment purposes. That second limb is the one people get wrong: an investment loan is not automatically unregulated. Genuine business purpose credit generally sits outside the Code, and a business purpose declaration can support that, but the declaration is a presumption rather than a switch and is ineffective where the credit provider knew or had reason to believe, or would have known had it made reasonable inquiries, that the credit was really for a Code purpose. Lenders that provide only commercial loans do not need a credit licence.
Only if that lender is an AFCA member, and membership is the condition that actually decides it. Lenders that provide only commercial loans are not required to hold a credit licence and are not legally required to be AFCA members, so a borrower dealing with a purely commercial private lender may have no external dispute pathway at all. Where the lender is a member, AFCA defines a small business as an organisation with less than 100 employees, and it cannot consider a complaint about a small business credit facility above an indexed threshold, currently 6.3 million dollars for complaints lodged on or after 1 January 2024. The practical step is to confirm membership before you sign rather than after something goes wrong, because it is not something you can add later.
What sources support this guide?
Every statutory provision cited on this page was read in its current form for this guide rather than taken from secondary summaries, and where a claim did not survive that check it was removed rather than softened. Three examples of that discipline are worth naming, because they run against what most material on this topic says. A widely repeated formulation that an equitable mortgagee has no power of sale is too strong for New South Wales, and the page states the narrower and more useful position instead. A case commonly offered as authority for the discretionary nature of a court-ordered sale could not be verified, and is under appeal, so the point is sourced to a different judgment that was read in full. And the external dispute threshold quoted almost everywhere as five million dollars is the unindexed base figure rather than the operative limit.
| Source | What it supports | As at |
|---|---|---|
| Real Property Act 1900 (NSW), ss 36(9), 56A, 57, 58, 58A, 74H, 74J, 74P | Priority by order of registration regardless of notice; the postponement machinery and the intervening mortgagee's joinder; the default notice and the one month floor; the power of sale and the limits on dispensing with notice; the scope limit on a caveat and the prior mortgagee carve-out; the 21 day lapsing regime; and the absence of any reverse onus on compensation | Current, read Aug 2026 |
| Conveyancing Act 1919 (NSW), ss 109, 111, 112 | The statutory power of sale available to an unregistered mortgagee and the removal of the deed requirement in 1986; the notice preconditions that apply outside the registered Torrens class; and the rule that a sale under the power is subject to interests having priority over the mortgage | Current, read Aug 2026 |
| King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 | That an order for judicial sale is the standard way of enforcing an equitable charge; that the statutory power cannot convey the first mortgagee's interest; that a court order is therefore needed to sell the whole interest; that the remedy is discretionary; and that the prior mortgagee must generally be joined | Judgment Oct 2005 |
| Land Title Act 1994 (Qld), ss 74, 124, 126, 130 | That a registered mortgage operates only as a charge; the carve-out for an instrument executed by a prior registered mortgagee and the two conditions on it; the 14 day and three month lapsing periods with the registered owner exemption and its claw-back; and the reverse onus and exemplary damages on an improper caveat | Current, read Aug 2026 |
| Property Law Act 2023 (Qld), ss 113, 114, 134, 135, 237 | The implied powers of a mortgagee and that they are subject to contrary agreement; the 30 day default notice that applies despite any agreement to the contrary; the court's power to order sale of an equitable mortgage and that such an order is without prejudice to any mortgage having priority; and the repeal of the Property Law Act 1974 | Commenced 1 Aug 2025 |
| Queensland Land Title Practice Manual, Part 11 | The registry's own warning that because a caveat does not provide all of the benefits of the Torrens system and the Land Title Act 1994, it should not be seen as a viable alternative to registering the interest | Updated 1 Aug 2025 |
| NSW LRS information sheet on caveats and mortgagee sales; Hopkinson v Rolt (1861) 9 HL Cas 514; Property Law Act 1958 (Vic), s 94; Property Law Act 2023 (Qld), ss 125 and 126 | The registry's confirmation that a caveat behind a prior registered mortgage does not prevent registration of the mortgagee's transfer and is removed on that registration; the rule that a first mortgagee's further advances made after notice of a second interest do not retain priority; and the state further advances provisions, verified as to their existence and subject matter rather than read in full | Info sheet Oct 2024; read Aug 2026 |
| Transfer of Land Act 1958 (Vic), ss 74, 76, 77, 90 | That a Victorian registered mortgage is a security and an interest in land but not a transfer; the two successive one month periods before sale and that neither is required to exceed one month if varied; the good faith duty on exercise; and the 30 day caveat lapsing period once a dealing is lodged | Current, read Aug 2026 |
| National Credit Code, Sch 1 to the National Consumer Credit Protection Act 2009 (Cth), ss 5, 13, 88 | The conditions for the Code to apply including the residential investment limb, the presumption of coverage and the predominant purpose test; the business purpose declaration and the circumstances in which it is ineffective; and the mandated default notice period before enforcement | Compilation No. 52, 1 Jul 2026 |
| ASIC: 25-301MR and the 2025 Federal Court penalty decision; INFO 207; the 18 June 2026 private credit news item; and 24-243MR | The penalties imposed for relying on business purpose declarations without reasonable inquiry and the counterfactual nature of that test; what commercial-only lenders must still comply with and that they need no credit licence; the regulator's stated position on private credit valuations and enforcement priorities; and the particulars of an allegation, not a finding, about avoiding the Code through corporate borrowers | Apr and Dec 2025; Apr 2024; Jun 2026; Oct 2024 |
| AFCA small business pages and Rules; ASIC MoneySmart glossary; APRA System Risk Outlook; RBA Financial Stability Review | The definition of a small business, the indexed credit facility limit and the membership condition; the only official description of bridging finance; the estimated size of the private credit market against the banking system; and the non-bank share of financial system assets in the Reserve Bank's own framing | Read Aug 2026; May 2026; Mar 2026 |
Legislation, registry practice and regulator guidance change, and the terms of your own loan and mortgage documents routinely displace the standard positions summarised here. Every period and threshold on this page is a statutory or standard-form position, not a statement about your loan. The positions in Western Australia, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory are deliberately not stated, because they were not verified for this guide. Nothing here is legal, financial or tax advice, no outcome, cost, approval or timeframe is promised, and the scenarios are illustrative. Confirm the detail with a property lawyer, and against the current legislation, before you act.
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