A caveat loan is a short term loan, which uses property as security. The loan terms are usually between 1 and 3 months and the funds are often used for working capital. This type of loan often involves a higher interest rate because of the higher risk associated with holding a caveat for security rather than a first registered mortgage.
Often a loan secured by a caveat operates as a ‘bridge’ between when the money is needed and when more permanent financing can be arranged.
Caveat is a Latin word meaning “let him beware”. This refers to the fact that the caveat once registered on title gives notice to the world at large that the holder of the caveat (i.e. the lender) has an interest in the land.