Quick answer
A short-term property loan is business finance secured by real estate for a defined period, usually one to twelve months, repaid in full at the end from a sale, refinance or incoming funds. Private lenders offer these as caveat loans, second mortgages or first mortgages, and they suit owners who need money quickly for a problem with a clear end date.
Key points
- Terms typically run from one to twelve months
- Repaid as a lump sum at the end, not over years
- Interest may be paid monthly, prepaid or capitalised
- Choosing the right term is as important as the amount
- Typical term
- 1 to 12 months
- Loan size
- $20,000 to $5,000,000
- Repayment
- Lump sum at the end
- Speed
- Same day possible to $250k
Short-term property loans are the bread and butter of private lending. They’re designed to solve a specific problem for a specific period, then disappear. Getting the most from one is mostly about choosing the right term and understanding how the money flows.
How a short-term property loan works
You borrow a set amount against property for a set period. During the term you either pay interest monthly, or the interest is prepaid from the loan or capitalised (added to the balance). At the end, you repay the full amount from your exit, whether that’s a sale, refinance or incoming funds.
There are no years of principal and interest repayments. It’s closer to a bridge than a mortgage in the usual sense.
Choosing the term
Get the term wrong and it costs you, whichever way you miss.
Too short and you risk running past the due date, paying extension fees or default charges and negotiating from a weak position.
Too long and, if there’s a minimum interest period, you pay for months you didn’t need.
A good rule of thumb is to estimate your exit date honestly, then add a buffer that reflects how much of that exit is outside your control. A refinance with an approval in hand needs less buffer than a property that isn’t listed yet.
| Exit | Suggested buffer beyond expected date |
|---|---|
| Contracted payment with a fixed date | 1 month |
| Bank refinance with approval in principle | 1 to 2 months |
| Property listed for sale | 2 to 4 months |
| Property not yet listed, or business sale | 4 months or more |
These are planning guides, not rules. Your circumstances may justify more or less.
Three ways to handle interest
- Monthly interest. You pay interest each month from business income. The payout at the end is just the loan amount plus final costs. Lowest total cost, but it needs cash flow.
- Prepaid interest. Interest for some or all of the term is deducted from the loan at settlement. You receive less cash up front, but have no payments during the term.
- Capitalised interest. Interest is added to the balance monthly. Nothing to pay during the term, but the payout grows every month.
The caveat loan calculator shows net funds and payout figures under each approach, using the dollar costs from your offer.
Short-term property loans vs unsecured short-term loans
If you don’t own property, or only need a small amount for a few months, unsecured short-term business loans may be quicker to arrange. They’re usually smaller and repaid in frequent instalments. Property-secured loans suit larger amounts, owners with credit issues and situations where daily repayments would strain cash flow.
Before you sign
- Confirm the term, the minimum interest period and the early repayment terms
- Ask for the payout figure at several points during the term
- Understand the extension process and its cost
- Read the default clauses with your solicitor
- Write down your exit plan and buffer, and check it against the term
A worked example: matching the term to the cash
A Brisbane property developer was owed the final payment on a completed townhouse project, expected in about four months once titles registered. Meanwhile, a new site needed a $350,000 deposit within three weeks.
We modelled three terms with the developer. A three-month loan would expire before titles were likely to register, risking extension fees. A twelve-month loan would cost more in total if repaid early, depending on the lender’s minimum interest period. A six-month term, with no early repayment penalty after the fourth month, matched the expected cash with a two-month buffer.
The private lender took a second mortgage over the developer’s investment property and capitalised the interest, so there were no repayments during the term. Titles registered in month five, the final payment arrived, and the loan was cleared with a month to spare.
Choosing a term: a quick guide
| Your situation | A term that often suits |
|---|---|
| Waiting on a known payment with a fixed date | 3 to 6 months, plus a buffer |
| Waiting on a property sale not yet listed | 9 to 12 months |
| Rebuilding accounts for a bank refinance | 12 months |
| Funding a project with staged income | 12 to 24 months, sometimes staged draws |
Always ask about the minimum interest period and any early repayment fees, as these shape the real cost far more than the headline term.
Find the right term with us
Tell us what you need, the property and when you expect to repay. We’ll suggest a term and structure that fits, and tell you plainly if a short-term loan isn’t the right tool. There’s no credit check when you first enquire, and we don’t broadcast your details.
The more accurate your dates and figures, the better we can match the loan to your exit. See if you qualify, or open the exit plan checker and then get in touch.
Frequently asked questions
How short can a short-term property loan be?
Some lenders will do a few weeks, but many set a minimum of one to three months, often with a minimum interest charge. If you only need money for a fortnight, ask what the minimum cost is before you proceed.
Should I choose a longer term just in case?
Usually a modest buffer is wise, because exits run late more often than early. But check whether the loan charges interest for the full term even if you repay early. A three-month buffer with no minimum interest period is often the sweet spot.
What's capitalised interest?
Interest that's added to the loan balance each month instead of being paid. You repay it all at the end. It frees up cash flow during the term but increases the final payout, so you need to know the peak figure.
Can I extend if I need more time?
Often, if you ask before the due date and the exit is still realistic. Extensions usually involve a fee and updated terms. Leaving it until after the due date can trigger default costs.