Most caveat loans sit somewhere between 50% and 70% of a property’s value, which is why an 85% caveat loan tends to stand out as something a bit different. This guide explains exactly what an 85% caveat loan involves, how lenders assess high LVR caveat funding, and why this end of the market comes with its own set of rules and pricing. It’s aimed at borrowers who’ve already looked at standard caveat lending and found the numbers don’t quite stretch far enough.
If you’ve got equity in a property but need to borrow closer to the top of what a lender will allow, understanding how an 85% caveat loan is structured will help you work out whether it’s realistic for your situation.
An 85% caveat loan is a caveat facility where the lender is willing to advance funds up to 85% of the property’s value, once any existing debt on the title is taken into account. That’s a notably higher loan to value ratio than most standard caveat loans, which typically max out well below that mark.
Because caveat lending usually involves less time for due diligence than a standard mortgage, most lenders keep their maximum lending limit conservative. An 85% caveat loan pushes right up against the edge of what the market will generally support, which means it’s offered by a smaller pool of lenders than a more typical 60% or 65% facility.
That smaller pool matters practically. A borrower searching for an 85% caveat loan will find far fewer options to compare than someone looking at a standard facility, which makes it worth casting a slightly wider net rather than stopping at the first lender contacted.
The mechanics of the loan itself stay the same as any caveat facility. A caveat is lodged over the title, funds are released, and the loan is repaid within a short term, usually somewhere between one and twelve months. What changes with an 85% caveat loan is the level of scrutiny applied before that first step, not the structure that follows it.
A high LVR caveat loan differs from a standard caveat facility in a few practical ways, mostly around how much scrutiny goes into the equity assessment. The gap isn’t just about pricing, it also shows up in how long the assessment takes and how much documentation a lender expects to see upfront.
Here’s a general comparison of how the two typically stack up:
| Feature | Standard Caveat Loan | High LVR Caveat Loan (85%) |
|---|---|---|
| Typical LVR range | 50% to 70% | Up to 85% |
| Lender pool | Wide, many lenders participate | Smaller, specialist lenders only |
| Valuation requirement | Often a desktop valuation | Full valuation almost always required |
| Pricing | Standard caveat rates | Higher rates, reflecting the extra risk |
| Exit strategy scrutiny | Reviewed | Reviewed closely, often required in writing |
Fewer lenders are comfortable at that upper edge, since a caveat loan up to 85% leaves far less buffer if the property needs to be sold quickly to recover the loan. That smaller margin for error is exactly why lenders tighten their assessment as the LVR climbs, layering in extra checks that a 60% deal might not require at all.
Working out your maximum caveat loan amount starts with the property’s current value, minus any existing mortgage, multiplied by the lender’s maximum lending limit.
Here’s a simple example: say a property is valued at $1,000,000 with an existing mortgage of $400,000. At an 85% LVR, the total lending against the property could reach $850,000, leaving $450,000 available once the existing mortgage is subtracted.
That $450,000 figure represents the ceiling for a new caveat loan, not necessarily what a lender will actually approve. An 85% caveat loan sits at the very top of most lenders’ comfort zone, so the final amount offered often lands a little below the theoretical maximum once the lender’s own risk buffer is applied.
It’s worth running this calculation yourself before approaching a lender, so you have a realistic sense of your ceiling going in. Knowing the theoretical maximum for an 85% caveat loan against your specific property helps you spot quickly whether a lender’s offer is genuinely competitive or sitting well below what the numbers should support.
Because a caveat loan up to 85% leaves less margin for error, lenders tend to dig a little deeper before approving one.
A few things get extra attention at this end of the market:
Equity available becomes a much tighter figure at 85% LVR than it would at 60% or 65%, so lenders want confidence that the valuation and the existing mortgage balance are both accurate before they commit. Even a small error in either figure can shift an 85% caveat loan from viable to unworkable, which is exactly why the checks at this level are more thorough than they would be lower down the LVR scale.
High LVR lending almost always comes with a rate premium compared to a lower LVR facility, and an 85% caveat loan is no exception. The extra cost reflects the reduced buffer a lender has if things don’t go to plan, and it’s priced accordingly rather than as an arbitrary penalty for borrowing more.
Establishment fees can also run higher on an 85% caveat loan, since more work typically goes into confirming the valuation and reviewing the exit strategy before approval. Some lenders will also shorten the maximum loan term available at this LVR, preferring a faster turnaround given the tighter margin involved, which is worth factoring into your repayment planning from the outset.
It’s worth weighing this cost against the alternative. If borrowing at 85% unlocks a deal or opportunity that a lower LVR loan simply couldn’t fund, the extra pricing on an 85% caveat loan may still make sense, provided the numbers work once that cost is factored in.
Comparing the total cost of an 85% caveat loan against a smaller, lower LVR facility plus some other source of the shortfall, such as a small equity contribution from another asset, is worth doing before committing. Sometimes the cheaper path overall isn’t maximising the LVR at all.
An 85% caveat loan suits borrowers who genuinely need to access close to the maximum caveat loan amount available, and who have a clear, realistic plan for repaying it within the loan term.
It’s less suitable as a first option if a lower LVR facility would cover your needs, simply because the pricing gap between a standard caveat loan and an 85% caveat loan can be significant. Borrowing only as much as you actually need, rather than maximising the LVR by default, usually works out cheaper overall.
A useful test before committing to an 85% caveat loan is asking whether a smaller amount at a lower LVR would still solve the problem. If the answer is yes, the extra cost of pushing all the way to 85% may not be worth carrying, even if the equity is technically there to support it.
An 85% caveat loan can be the right tool when equity is tight and timing matters, but it’s a facility worth approaching with a clear exit strategy and realistic expectations about cost. Comparing lenders who genuinely operate at this end of the market, rather than assuming every caveat lender will stretch to 85%, saves time and avoids unnecessary knockbacks.
Getting an 85% caveat loan approved comes down to preparation as much as anything else. A current valuation, a clean explanation of any existing debt on the title, and a specific, documented exit strategy will put you ahead of most applications a lender sees at this end of the market.
If you want to understand how loan to value ratio works more broadly before deciding how far to push it, our guide to LVR explains the fundamentals. For the basics of how caveat lending is priced and structured, our guide to caveat loans covers the essentials, and if you want to see how a maximum caveat loan amount is worked out in dollar terms rather than as a percentage, our breakdown of maximum caveat loan amount options walks through that angle in detail.
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