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A sale in progress answers the question every short-term lender asks first: how does this get repaid. It also creates a common need. The business has a bill due now, and the money to pay it arrives at settlement in eight weeks.
Three stages, three strengths
- Listed, not sold. The exit is expected but not certain. Lenders will look at the asking price against the valuation, how long it has been on the market and the agent’s feedback. Leverage is conservative, and the term should cover a realistic campaign plus a settlement period.
- Contract exchanged, conditions outstanding. Stronger, but finance or due diligence conditions mean the buyer can still walk.
- Unconditional contract with a settlement date. The strongest exit there is. The lender can see the price, the date and the buyer’s deposit. This is a closed bridge and it prices accordingly.
What the lender needs
The contract or agency agreement, a payout figure for the first mortgage, and an estimate of selling costs. The test is simple arithmetic: sale price, less the first mortgage, agent’s commission, legal costs and any tax payable at settlement, must comfortably exceed the caveat loan payout.
How repayment works
The caveat lender’s payout figure is included in the settlement. On the day, the buyer’s funds pay the first mortgagee, then the caveat lender, then the costs, and the balance goes to the seller. The discharge of mortgage and withdrawal of caveat are lodged together with the transfer.
Tell the conveyancer early
The solicitor or conveyancer acting on the sale needs to know about the caveat from the start, so the payout and withdrawal are built into the settlement. A caveat that surprises everyone a week before settlement causes avoidable panic.
Alternatives
Where the need is to buy the next property before this one settles, that is bridging finance, structured around both transactions. Where the sale is of a completed development, see take-out funding.
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Get matched with a funderFAQ
Does the caveat stop the sale?
No. It is withdrawn at settlement when the loan is repaid from the proceeds. The buyer takes a clear title.
What if the sale falls through?
The loan still has to be repaid by its end date. Take a term with margin beyond the expected settlement, and tell the lender immediately if the contract fails so an extension or another exit can be arranged.
Can I borrow against the deposit the buyer paid?
No. The deposit is usually held in trust until settlement. The loan is secured against the property, not the deposit.