June 20, 2007 SYDNEY
Are Caveat Loans The Right Choice For Me?
“When people say short term finance, it can mean two different things. You have 12 month loans which are typical; however you can get even shorter terms of around one to three months which give you the fastest access to money” says Daniel Dunsford (Accom Finance).
In a world where timing can mean everything from closing a deal successfully to losing your money, getting funding at that critical point in time can be crucial. The question for most people is when, where and who can I trust to get the money when I need it? I will answer these questions in detail later but for now I would like to focus on exactly what a short term caveat loan is and why lenders such as Accom use them to lend people their capital.
So here is the technical term;
“Caveat means a document lodged with the Recorder of Titles by a person authorised to do so forbidding the recording of any dealing on the title subject to the caveat. Literally it means beware. In real estate, it warns persons (prospective purchasers, mortgagees, etc.) who propose to deal in the land that a third person (normally the person lodging the caveat at the Titles Office) has some right or interest in the land.”
Most people have heard the phrase “Caveat Emptor” if they have ever dealt in a property transaction or the likes. It basically means buyers beware and you are proceeding with the deal at your own risk. In the world of mortgage lending Caveats are used in similar situations to warn anybody else that, hang on this person has a caveat on their title so there’s most likely going to be some finance owing to the caveator or mortgagee. Caveats are always placed on your property after your first mortgagee on your title (A banking institution like Westpac is the most common) which may look like similar to this:
1. RESERVATIONS AND CONDITIONS IN THE CROWN GRANT(S)
2. AC987789 MORTGAGE TO MYBANKING CORP PTY LTD
3. AC986352 CAVEAT BY ACCOM FINANCE PTY LIMITED
So why do lenders use Caveats as a way to lend money? Simply when a lender wants to do a loan with a client, typically they will need a consent and “deed of priority” from a first mortgagee in order to be able to register their mortgage on title and lend you the money. This process can take anywhere from 4-6 weeks, that’s where Caveats come into the picture. A Caveat can be registered on title almost instantly without the need for consent from a first mortgagee and your money can be advanced literally within 24 hours depending on the speed and experience of the lender.
So when do I need a Caveat loan? I would like to point out that firstly Caveat loans are always expensive no matter who you go to, they are priced this way because of the speed, flexibility and risk to the lender not being able to do all the credit checks like the banks do.
The only time you should consider a Caveat loan for short term finance is if you have pretty much exhausted all other avenues or you simply come to a point where getting that money is vital to move on with whatever it is you are doing.
There are a couple of other reasons such as poor credit history and defaults on your loan or credit report with make it extremely difficult to get money from a traditional lender. If you need some examples of types of loans please visit www.accomfinance.com.au
Where can I get a Caveat loan from? Caveats are pretty easy to come by these days, years ago there weren’t as many lenders around, however since property went through a healthy cycle in 2001-2003 we saw a lot more entering the market. The best place to find a lender is through your local finance broker or by simply searching google.com you can find a suitable lender such as Accom Finance.
Who can I trust? I’ve gotten these questions a lot over the years and its safe to say that Caveat lenders sometimes get a bad rap or have a stigma attached to the industry of “shark behavior” or “predatory lending”. Although there are some unscrupulous lenders in the market I am confident that most of them genuinely want to provide a quality service to the community and fill a gap that where other lenders can’t deliver money as quickly. At the end of the day the service does help thousands of people pursuing their investment or business ventures and ideas where the banks fall short.
Things to look for when choosing a quality lender:
- How long have they have been around for?
- Are they easily contactable, have a quality website?
- Do they return your calls and respond to your questions quickly?
- Are their fees reasonable? When dealing with a lender you should always check their application, establishment and exit fees. Also the interest rate per month is important, however you should be wary if one lender has a low monthly fee but high applications or establishment fees, calculating the actual overall cost per month will usually reveal that they are more expensive for that short period of time you need the loan for.
- Overall professionalism, get a feeling for the person you’re dealing with, as always if it doesn’t feel right try dealing with someone different.
Should I use a finance broker when trying to get a loan? I always recommend using a broker for these types of loans as they can help take a lot of the guess work out of it for you and usually have been dealing with a reputable lender for a number of years. If you’re not sure always just do a quick search on the internet.
If you have any questions or comments you can send them to leigh@accomfinance.com.au
Author: Leigh Dunsford
Source: Accom Finance (www.accomfinance.com.au)
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