Secured loan against residential property: using a house, unit or rental to fund your business

For most Australian business owners, the biggest store of equity isn’t in the business. It’s in residential property: the family home, a rental bought years ago, a unit held in the super-saver years before the business started. Using that equity for the business is common and often sensible, provided it’s done with clear eyes about what’s at stake.

This page explains how residential property is judged as security for a business loan, which kinds work best and how to keep the risk proportionate. If your home is already mortgaged and you want to keep that loan, our page on a second mortgage on your home for business covers that path step by step.

Can you get a business loan secured on residential property?

Yes. A house, townhouse, unit, rental or holiday home can secure a business loan from $20k to $5m. We lend up to 80% of value on residential security, the highest limit of any property type, because residential property usually has the deepest pool of buyers. There’s no sworn valuation: we assess value ourselves.

The lender records its interest on the title as a first mortgage, a second mortgage or a caveat. Land Use Victoria describes a mortgage as the document that “sets out the terms and conditions of the loan”, recorded on the title so the lender’s rights are clear if repayment fails.

Does it matter that the property is residential if the loan is for business?

What decides how the loan is treated is the purpose of the money, not the type of property behind it. ASIC explains that the National Credit Code covers credit provided “wholly or predominantly” for personal, domestic or household purposes, or for residential investment property. A loan used to run or grow a business sits outside that.

That’s why you’ll be asked to confirm the business purpose in writing, and why we lend for business purposes only. Buying a home to live in, renovating it or paying household bills aren’t purposes we fund, even if the security is the same house.

How are different residential properties judged?

Property	How it’s usually viewed	What to watch
Detached house in an established suburb	Strong, broad buyer market	Existing loans, every owner’s signature
Townhouse or villa	Strong in most metro and regional centres	Strata levies, if strata titled
Standard apartment or unit	Good in established complexes	Building defects, large special levies
Very small unit, serviced or student apartment	Narrow buyer pool	Assessed case by case
Dual occupancy or house with a granny flat	Often attractive to investors	Whether it’s on one title or two
Holiday home in a coastal or country town	Depends on the local market	Slower sales in small towns
Large residential acreage	Assessed with a lower limit	Access, use and buyer depth

The common thread is saleability. A property that would sell quickly to many buyers supports more than one that would sit on the market.

Home or investment property: which should you offer?

If you have a choice, an investment property is often the better security for a business loan, for reasons that have little to do with its value:

• Fewer people involved. A rental may be in one name; the home is often in two.
• Less at stake for the family. If the exit stumbles, the household isn’t living in the security.
• Cleaner exit options. Selling a rental is a business decision; selling the home is a family upheaval.

That said, plenty of owners use the home, especially when it holds the only meaningful equity. Our page on releasing equity from an investment property covers the rental route in more detail.

What reduces how much a residential property can support?

1. Existing loans. The 80% limit applies to all debt on the title. A home worth $1m with $600k owing has up to $200k of room at that limit; how much equity you can use walks through the sums.
2. Location. Thin markets, such as small towns, take longer to sell.
3. Building type. Very small units, serviced apartments and unusual construction narrow the buyer pool.
4. Strata issues. Defects or big special levies.
5. Ownership. If one owner can’t or won’t sign, that property can’t be used.

You can test your own numbers with the secured borrowing calculator, or check your loan in 60 seconds for an indicative answer from us directly.

Does GST or tax affect a residential exit?

The tax picture is usually simpler than for commercial property. The ATO explains that for existing residential premises “the sale from the vendor to you is input taxed”, meaning GST isn’t payable on the sale, and residential rent is input taxed too. If a sale is your exit, there’s no GST slice to set aside from the proceeds as there can be with a commercial building.

Capital gains tax can still apply to an investment property, so if you plan to repay the loan by selling a rental, ask your accountant what the sale will net after tax before you rely on the figure.

Illustrative example: a rental funds a café fit-out

Illustrative example only; the business and figures are made up.

A Hobart couple are opening a second café and need $180k for the fit-out and coffee equipment. They own their home jointly with a bank loan, and a two-bedroom rental unit in the wife’s name, assessed at around $550k with $200k owing to another lender.

They’d rather not involve the home. Illustrative: at an 80% residential limit, total debt on the unit could reach $440k, leaving up to $240k of room behind the existing loan. A second mortgage over the unit covers the $180k. Interest is capitalised, so nothing is payable for the first 6 months while the new café finds its customers, and the exit is a refinance once the café has a few months of trading figures.

How do you protect the home if it is the security?

If the home is the only option, a few habits keep the risk proportionate:

• Borrow what the business needs, not what the home allows. The limit is a ceiling, not a target.
• Name a firm exit before you sign, with a fallback if it runs late.
• Make sure every owner understands the loan, ideally with their own solicitor. If a parent or relative is offering their home instead, see third-party security.
• Keep the existing home loan up to date; a second mortgage doesn’t replace it.
• Use the term well. Open terms mean you can repay early anytime with no penalty, so clear the loan as soon as the exit arrives.

Got equity in a home or rental? See if you qualify

Equity sitting in a house or unit can be the difference between waiting and moving. If a business opportunity or problem needs funding now, it’s worth finding out what that property can do.

Asking takes about a minute, and there’s no credit check when you enquire, so your credit score isn’t affected. Your details come only to us as the direct lender; they won’t be sent to a pile of lenders who then all phone you. A real specialist reads your enquiry and calls you. Please answer accurately about who owns the property and what’s owing on it, because that’s what makes our first answer the right one.

See what your residential property can secure →