Using home equity for your business: the owner's decision

For many small business owners, the family home is the biggest asset they have — and the most emotional one. So when the business needs a larger amount than its trading alone can support, the question lands at the kitchen table: should we use the house?

We won’t tell you what to decide. We’ll lay out how it works, what your options are, and the questions we’d want answered if it were our home.

What does “using home equity” actually mean?

Equity is the difference between what your home is worth and what you owe on it. If a home is worth $900,000 and the home loan balance is $400,000, there’s $500,000 of equity — though lenders will only lend against part of it.

Using that equity for business means offering the home as security for a business-purpose loan. The lender registers an interest over the property. If the loan is repaid, nothing changes. If it isn’t, the lender has the right to recover the debt from the property.

business.gov.au describes a secured loan simply: one that’s “backed up by collateral or security – something of value you have, such as property”.

What are the ways to borrow against a home for business?

Option	How it works	Often suits
First mortgage	The business lender becomes the first-ranking lender, usually refinancing any existing home loan	No existing loan, or a full restructure
Second mortgage	A second-ranking mortgage behind your existing home loan	Keeping your current home loan in place
Caveat loan	A caveat on the title rather than a mortgage, usually short term	Short-term needs where a mortgage isn’t practical

Property-secured business loans run from $20,000 to $5,000,000, over residential or commercial property. We explain each in more detail: second mortgages for business and caveat loans on your home.

Why do owners choose to use home equity?

Because it can open doors that trading alone can’t:

• Larger amounts than an unsecured loan sized on turnover.
• Longer terms, which can mean smaller repayments.
• More flexibility where trading history is short or credit history is patchy.
• A way to clear expensive or messy debt, such as an ATO balance or personal cards that funded the business.

What’s the real risk?

It’s simple and serious: if the business can’t repay, the home is at risk. For a sole trader it’s sharper still, because business.gov.au notes that sole traders already have unlimited liability — your personal assets are exposed to business debts even without a mortgage. A mortgage makes the connection explicit and gives the lender a direct path to the property.

That’s why we’d always want you to think about the whole family’s position, not just the business plan. Our page on protecting the family home walks through practical ways to limit the risk.

Should you redraw your home loan or take a separate business loan?

Many owners’ first instinct is to redraw or top up the home loan. It feels easy. But it mixes business borrowing into a loan designed for your home, which can make records and tax treatment harder to follow. A separate business-purpose loan — even one secured by the same property — keeps the business debt clearly labelled.

The borrow personally or through the business tool compares these routes side by side, and is business loan interest tax deductible? sets out the questions for your accountant.

If you’d like to know what’s realistic against your property, start a 60-second enquiry — no credit check, and a specialist will call you.

What should you ask before using the house?

We’d want clear answers to each of these:

1. What exactly is the money for? A purpose that helps the business earn more, or fixes a clear problem, is very different from plugging an ongoing loss.
2. How much is truly needed? Borrow for the purpose, with a buffer — not the maximum available.
3. What’s the exit? Repayment from trading, a sale, a refinance to unsecured finance later? Write it down.
4. What if it takes longer? Illness, a lost customer, a slow season. How long could you keep paying?
5. Who else is affected? Co-owners must sign. Family members living there should understand it.
6. Is there a way to leave the home out? Sometimes an unsecured option or another property could work instead.

Illustrative example: A couple own their home with a modest home loan remaining. Their joinery business has won a contract that needs $250,000 of machinery and materials upfront. Trading alone won’t support that amount unsecured. They choose a second mortgage behind their home loan, sized to the contract with a buffer, and agree an exit: repay from the contract payments over two years, or refinance once the business has the machinery on its books.

What if the home is in joint names?

Every registered owner has to sign the mortgage. If your partner owns half the home but isn’t in the business, they’re putting their share on the line for a business they don’t run. That deserves a proper conversation and usually independent advice — see borrowing against a home in joint names.

Talk it through before you decide

This is one of the biggest decisions an owner makes, and it should be made with a person, not a web form alone. The enquiry takes about 60 seconds and there’s no credit check. Your details go to one specialist — never sprayed to a stack of lenders — who will call you to understand the property, the purpose and the plan. Please be accurate about the property’s value, what you owe and who’s on the title, so we can show you the right option first time.

Talk to a real person about your home →