Can you borrow against a property you've sold but not yet settled?

You’ve done the hard part. The property is sold, contracts are exchanged and the money is coming. The trouble is the calendar: settlement is 60, 90 or even 180 days away, and the business needs funds this month.

The short answer is that a property under contract can usually still secure a loan. You remain the registered owner until settlement day, and a buyer who has signed is about the clearest exit a lender ever sees. But “sold” changes how the loan is sized and structured, and a few details in the contract and on the title decide whether it is simple or awkward. This guide walks through them.

Why can a sold property still be used as security?

Exchange of contracts creates obligations between you and the buyer, but the title doesn’t change hands until settlement. Until then you are the registered owner, and you can grant a mortgage or a caveatable interest to a lender, just as you could before it was listed.

What the contract does require is that you hand over the title free of mortgages at settlement. That fits neatly with a short-term private loan. On settlement day, the buyer’s funds pay out your existing bank mortgage and the new private loan, both discharges are lodged, and you receive the balance. This is the same mechanism that handles any mortgage on a property being sold, so it causes no surprise for the buyer’s side. Our guide to what happens at settlement covers the order of payments.

How does a lender size a loan on a sold property?

A sold property changes the question. Before the sale, a lender asks “what is this property worth?” After exchange, it mainly asks “what will actually land on settlement day?” That is the net proceeds figure, and it is always lower than the contract price.

Item	What it means for the loan
Contract price	The starting point, now fixed rather than estimated
Less: existing mortgage payout	The bank is paid first; ask for a current payout figure, not last month’s statement
Less: agent’s commission and marketing	Usually deducted from the deposit or proceeds at settlement
Less: rates, water and other adjustments	Small, but they come off the top
Less: any tax withheld by the buyer	See the clearance certificate section below
Less: interest and costs on the new loan	If interest is capitalised, it is paid from proceeds too
Equals: net proceeds	The loan sits comfortably inside this figure

Our general limits still apply: up to 80% of value on residential security and up to 70% on commercial. In practice, the net proceeds figure is often the tighter limit, especially where an existing mortgage is large. Interest can be capitalised for up to 6 months, so there are no repayments for the first 6 months, and with open terms there is no penalty when settlement repays the loan early.

If you’re ready to test the numbers on your own sale, start a quick enquiry with the contract price, settlement date and what is owing.

What does a buyer’s caveat change?

This is the detail that catches people out. Many buyers, particularly on long settlements, lodge a caveat to protect their interest under the contract. In the NT, for example, the land titles office describes a caveat as blocking registration of other documents over the land and recording a claim to an interest in it. Other states work in a broadly similar way.

That matters because a new registered mortgage is one of the documents a purchaser’s caveat can stop. There are three usual ways through:

1. Consent. The buyer’s solicitor consents to the mortgage being registered. It is paid out at settlement anyway, so many buyers’ representatives agree once they understand the structure.
2. A caveat loan. The lender protects its own position by caveat rather than registered mortgage. Read more about how caveat loans work and when they suit.
3. Different security. If another property you own has room, the loan can sit there instead, with the sale proceeds still the planned repayment.

Ask your solicitor to search the title on day one so you know which route you’re on.

What is the clearance certificate trap?

Since 1 January 2025, the ATO’s foreign resident capital gains withholding has applied to property of any value at a rate of 15%. If the seller doesn’t hand over a valid clearance certificate at or before settlement, the ATO says the buyer must withhold that amount from the sale proceeds and pay it to the ATO. That rule catches Australian residents who simply forget the paperwork.

For your loan, that is a big gap on settlement day. On a $1m sale, 15% is $150k that never reaches your solicitor’s trust account. A lender sizing a loan on net proceeds will either ask to see the certificate or assume the withholding happens.

The fix is simple if you start early. The ATO says applications can take up to 28 days to process, recommends lodging at least 28 days before settlement, and certificates are valid for 12 months from issue. You don’t need a signed contract to apply, so if the sale is still being negotiated, apply now.

What if the buyer doesn’t settle?

A signed contract is a strong exit, but it isn’t a guarantee. Buyers lose finance, get cold feet or run into their own problems. A lender lending against a sold property will ask what happens if settlement fails, and it is worth having a straight answer:

• Resale. Could the property be relisted and sold within a few months?
• The deposit. If the buyer defaults, the deposit is often forfeited to you, which may cover part of the gap.
• Refinance. Could the loan be refinanced to a longer-term lender if the sale is delayed?
• Another property. Is there other equity that could support the loan for longer?

If the worst has already happened, our page on what to do when a buyer fails to settle covers the next steps. For a property that is listed but not yet sold, see bridging until a property sells.

Illustrative example

Illustrative only. The business and figures are invented.

An engineering business in Ballarat lands a large fabrication contract and needs $180k for steel and labour before the first progress payment. The owner has just exchanged contracts on an investment unit for $820k, with a 120-day settlement chosen by the buyer.

The unit has $350k owing to the bank. After commission, adjustments and allowing for the new loan’s capitalised interest, net proceeds sit around $430k. The owner applies for an ATO clearance certificate the same week, so no withholding is expected.

The buyer has lodged a purchaser’s caveat, so the lender takes a caveat loan of $180k over the unit, with the buyer’s solicitor confirmed as aware of the arrangement. Interest is capitalised, so there are no repayments while the business delivers the job. On settlement day, the bank and the private loan are paid out together, both are discharged, and the owner receives the balance.

Which documents speed this up?

Sold-property loans are often quick because so much is already on paper. Have these ready:

• the signed contract of sale, including any special conditions and the settlement date;
• a current payout figure for the existing mortgage;
• a title search (your solicitor can order one) showing any caveats;
• the ATO clearance certificate, or proof you’ve applied;
• ID for every owner, plus company or trust documents if an entity owns the property;
• a short note on what the funds are for and how the business uses them.

Funding can happen in as little as 24 hours from a clean, complete application, and a sold property with its paperwork in order is often the closest thing to clean that a lender sees. Our exit strategy guide explains how lenders weigh a contracted sale against other exits.

Money tied up in a sale? See if you qualify

Waiting for settlement while the business needs the money now is one of the most frustrating spots an owner can be in. You’ve already done the work. The funds are coming. A short-term loan simply moves them forward.

Telling us about it takes about 60 seconds through our online loan check, and asking doesn’t touch your credit file. There is no credit check just to enquire. Your details go to one direct lender, not a pile of lenders who all call at once, and a secured-lending specialist reads your enquiry and rings you personally. Give us the real numbers, including the contract price, settlement date and exactly what is owing, so the first answer you get is an accurate one.

See if your sale can fund you now →