Can I Use My House as Security for a Business Loan in Australia?
Potentially, yes. An Australian business owner may be able to use residential property as security for a genuine business loan where there is suitable equity, an acceptable loan-to-value ratio (LVR) and a realistic plan to repay the loan.
This is known as property-secured business finance. The property may be a home, investment property or another property owned by the borrower, company or related party, depending on the structure and lender criteria.
Using a house as security can provide access to business funding, but it also creates a serious risk: if the loan cannot be repaid under its terms, the secured property may be at risk.
At Assurity Capital, private first mortgages and second mortgages are available for genuine business and investment purposes only. We do not provide consumer loans. Finance is subject to assessment, suitable security, eligibility, lender criteria, fees, approval and a realistic exit strategy.
What does it mean to use a house as security for a business loan?
When a property is used as security, the lender registers a mortgage over the property. This gives the lender security for the business loan.
The borrower receives funds for an eligible business or investment purpose, while the property supports the loan.
Depending on the existing debt position, the loan may be structured as:
A new first mortgage.
A refinance of an existing first mortgage with additional business funding.
A second mortgage behind an existing first mortgage.
A short-term bridging or private-lending facility.
A debt-consolidation loan secured by property.
The most suitable option depends on the property, current loan balances, funding purpose, timeframe and exit strategy.
Can I use my owner-occupied home as security for business finance?
Potentially, where the loan has a genuine business or investment purpose and meets the lender’s criteria.
The property does not need to be commercial property for it to support a business-purpose loan. However, a residential home is a significant asset, so borrowers should carefully consider the risks before offering it as security.
The lender may assess:
Who owns the property.
Whether there is an existing mortgage.
The property’s current value and location.
The amount of equity available.
The proposed business use of funds.
The borrower’s existing debts and repayment history.
The realistic exit strategy for the new loan.
A personal residence being used as security does not make the loan a consumer loan if the funds are for a genuine business or investment purpose. However, legal, financial and tax advice should be obtained where appropriate.
What business purposes can a property-secured loan be used for?
Eligible property-secured business finance may be used for purposes such as:
Working capital.
Purchasing stock, equipment or business assets.
Business acquisition or expansion.
Commercial or investment-property acquisition.
Development, construction or renovation costs.
Refinancing an existing business loan.
Consolidating eligible business debts.
Paying business-related ATO obligations.
Meeting a time-sensitive business settlement.
Bridging a gap before a sale, refinance or capital event.
The lender will require a clear explanation of the purpose. Funds for personal, domestic or household purposes are outside Assurity Capital’s lending scope.
How much can I borrow against my house for business purposes?
The amount depends on more than the property’s equity.
Lenders generally assess the total debt secured against the property as a percentage of the property’s accepted value. This is known as LVR.
For example:
Property value: $1,800,000
Existing mortgage balance: $700,000
Proposed business loan: $250,000
Total debt after settlement: $950,000
$950,000 ÷ $1,800,000 × 100 = 52.8%
The total LVR would be 52.8%.
A lower LVR can create more equity buffer, but it does not guarantee approval. The property type, borrower circumstances, purpose, costs and exit strategy remain important.
Do I need to refinance my current home loan?
Not necessarily.
If there is already a first mortgage over the property, a borrower may consider either:
Option | How it works | May suit where |
Refinance and increase | A new first-mortgage loan pays out the existing mortgage and includes additional funds. | The borrower needs a full debt restructure or a larger funding amount. |
Second mortgage | A new lender provides funding behind the existing first mortgage. | The borrower wants to retain the first mortgage and needs defined short-term business funding. |
A second mortgage lender assesses the combined LVR, which includes both the existing first mortgage and the proposed second mortgage.
The terms of the existing mortgage should also be reviewed. Some first-mortgage documents may affect a borrower’s ability to grant further security.
Can I use a house as security if I have bad credit?
Potentially.
Bad credit, ATO debt or a declined bank application does not automatically prevent a private property-backed business loan. The lender will assess the complete position, including:
Available property equity.
Existing debt and payout figures.
The genuine business purpose.
Current financial position.
Property marketability.
The exit strategy.
The reason for any prior credit issues.
Transparency is important. A borrower should disclose arrears, defaults, creditor pressure, tax debt and other loans secured against the property at the beginning of the assessment.
What documents may be required?
Requirements vary, but the following information can assist an early review:
Property address and ownership details.
Current loan statements and payout figures.
Details of any mortgages, caveats or other security interests.
Recent valuation evidence or comparable property sales.
Proposed loan amount and required settlement date.
A clear use-of-funds breakdown.
Business, company or trust documents where relevant.
Information supporting the intended exit strategy.
Details of any proposed sale, bank refinance or business transaction.
What are the risks of using a house as security for a business loan?
Using property as security can make business funding possible, but it should be approached carefully.
Key risks include:
The total debt secured against the property may increase.
Interest, fees and legal costs may increase the final loan amount.
Interest may be paid monthly or capitalised, depending on the loan structure.
A property value fall may reduce available equity.
The planned sale or refinance may be delayed.
The property may be at risk if the loan cannot be repaid according to its terms.
Before proceeding, borrowers should understand the loan documents, repayment obligations, total costs, maturity date and consequences if the exit strategy does not occur as planned.
Using property as security for business funding with Assurity Capital
Assurity Capital assists business owners, investors and property professionals across Sydney, NSW and Australia with private property-backed finance.
We consider private first mortgages, second mortgages, bridging finance, debt consolidation and short-term business funding where there is suitable security, an eligible business or investment purpose and a realistic exit strategy.
Finance is subject to assessment, suitable security, eligibility, lender criteria, fees, approval and a realistic exit strategy.
Can I use my house as security for a business loan?
Potentially. A house may be used as security for an eligible business-purpose loan where the property, available equity, LVR and exit strategy meet lender criteria.
Is a business loan secured by my house a mortgage?
Yes. Where a lender takes security over real property, it will generally be structured through a mortgage over that property. It may be a first mortgage or a second mortgage.
Can I use an investment property as security for a business loan?
Potentially. Residential investment, commercial, industrial and other suitable property types may be considered, subject to lender criteria.
Can I keep my existing home loan and get business funding?
Potentially. A second mortgage may be considered where suitable, allowing the existing first mortgage to remain in place.
Will I lose my house if my business loan is not repaid?
A secured loan puts the property at risk if repayment obligations are not met. The loan and security documents, and applicable law, determine the lender’s rights. Independent legal advice should be obtained before proceeding.
How quickly can a property-secured business loan settle?
Timing depends on the property, existing lender information, ownership structure, legal documentation, valuation evidence and lender conditions. No settlement date should be assumed until the full scenario has been assessed.
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