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For many small and medium business owners, the home is where the equity is. Banks take homes as security for business lending every day. Private lenders do the same, faster and with less paperwork, at a higher price.
How it is structured
- Borrower. The company or trustee that runs the business.
- Guarantor and mortgagor. The homeowner or owners, who guarantee the company’s loan and give a mortgage or caveat over the home to support the guarantee.
- Purpose. Business only: working capital, tax debt, stock, equipment, an acquisition, a settlement. A business purpose declaration is signed, and the lender will want evidence that it is true.
Who has to sign
Everyone on the title. A home owned jointly by a director and a partner who has nothing to do with the business needs both signatures. Lenders will generally insist the non-director owner gets independent legal advice, and sometimes independent financial advice, and signs a certificate saying so. This step exists because courts have set aside guarantees where a spouse did not understand what they signed. It protects both sides.
What you can borrow
| Position | Limit on this site |
|---|---|
| First mortgage, no existing loan | Up to 70% of value |
| Second mortgage behind a bank | Up to 75% of value, both loans combined |
| Caveat loan | Up to 65% of value, both loans combined |
On a $1.5 million home with a $600,000 bank loan, a second mortgage to 75% allows about $525,000 of new borrowing, before fees.
The risks, stated plainly
- If the business fails, the debt does not. The lender can sell the home to recover it.
- Private loans are short. If the exit does not happen on time, default interest applies and the equity erodes quickly.
- Consumer credit protections, such as hardship variation rights under the Code, do not apply to business lending.
- A bank first mortgagee may need to be told, depending on its terms.
When it makes sense
Where the need is specific and short, the amount is modest relative to the equity, and the repayment source is identifiable: a contract about to pay, a property being sold, a refinance in progress. It makes less sense as a way to fund ongoing losses.
Alternatives to consider first
Commercial or investment property, if you own any. Equipment or debtor finance for those specific needs. A payment arrangement with the creditor causing the pressure. If the home is still the right answer, see loans against residential property and caveat loan on a director’s home. This is general information, not legal or financial advice.
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Get matched with a funderFAQ
Is this a home loan under consumer credit law?
No. The National Credit Code applies based on the purpose of the loan and who the borrower is, not the type of security. A loan to a company for business purposes is outside it, even when secured by a home.
My partner is on the title but not in the business. What happens?
Your partner must sign the security and guarantee, and lenders will normally require them to get independent legal advice first.
Can the home be security if it already has a bank mortgage?
Yes. A second mortgage or caveat sits behind the bank. The total of both loans must fit within the lender's limit, up to 75% of value for second mortgages.