Plenty of tradies are asset rich and cash poor. The house has gone up in value, the business is busy, but the bank account is empty because money’s tied up in jobs, tools and unpaid claims. Using home equity for business can turn that value into working money quickly. Here’s how it works, which option to pick and how to do it without putting the family home at unnecessary risk.
Key takeaways
- Equity is what your property is worth minus what you owe on it.
- You can use it through a second mortgage, first mortgage, bridging loan or, in Victoria only, a caveat loan.
- No financials are needed, bad credit is considered, and funding can happen in as little as 24 hours in some cases.
- Terms are typically 1 to 12 months, so the loan needs a clear exit.
- The money must be used for business or investment purposes.
How do I work out my usable equity?
Start with a rough estimate:
- Estimate the property’s value. Recent sales of similar homes nearby are a good guide. The lender will get a proper valuation.
- Check your loan balance. Grab your latest home loan statement, including any redraw you’ve used.
- Subtract. Value minus loan balance is your equity.
- Allow a buffer. Lenders won’t lend against every dollar of equity. How much you can use depends on the property type, location and your plan to repay.
Example (hypothetical): A carpenter’s home in Geelong is worth about $900,000 and has $420,000 owing. That’s $480,000 of equity. After the lender’s buffer, a realistic loan might be well under that, which is still plenty to cover a $150,000 materials and wages gap on two new builds.
What are my options for using home equity?
| Option | How it works | Best for |
|---|---|---|
| Second mortgage | New loan ranks behind your existing home loan, which stays untouched | Most tradies who already have a home loan |
| First mortgage | New loan takes first position, often paying out your current loan | Properties owned outright, or when refinancing makes sense |
| Business bridging loan | Short term loan until a property sale, settlement or refinance | Waiting on a sale or a bigger deal to settle |
| Caveat loan | Secured by a caveat on title rather than a registered mortgage | Very fast deals in Victoria only |
Second mortgages are by far the most common choice. See fast second mortgage for details, or fast first mortgage if your property has no loan on it. If you’re waiting on a sale, business bridging loans may suit.
What can tradies use home equity for?
- Paying an ATO debt before firmer action starts
- Buying materials in bulk for signed jobs
- Covering wages while waiting on progress claims or retention
- Buying plant, a ute or tools, especially used or at auction
- Settling on land for a small build
- Finishing a build that’s run over budget
- Consolidating several expensive business debts into one. See debt consolidation.
Why use home equity instead of an unsecured loan?
An unsecured loan is great when you don’t own property or only need a smaller amount. But home equity has some clear advantages:
- Bigger amounts. Loans secured against property can go up to $5 million.
- No financials. Handy if your tax returns are behind.
- Bad credit considered. A past default or ATO arrangement doesn’t automatically rule you out.
- Pricing. Because the lender has security, secured loans are often priced more sharply than unsecured ones. Every loan is still priced on your circumstances, and we find the sharpest rate available for your situation.
For a full comparison, read unsecured vs secured business loans for tradies.
What are the risks, and how do I manage them?
Using your home as security is a serious decision. Manage the risk with these steps.
- Borrow for a clear purpose. Know exactly what the money is for and how it earns its way.
- Have a realistic exit. Signed progress claims, a retention release, a property sale or a refinance. Put dates on it.
- Add a buffer. Assume payments arrive a few weeks late and plan for it.
- Borrow what you need, not the maximum. Less borrowing means less pressure.
- Talk to your partner or co-owner. If the property is jointly owned, everyone on title will need to sign.
- Talk to your accountant about how the loan fits your tax and business structure.
- Watch the term. Short term loans need to be repaid or refinanced by the end date. Start your exit early.
How does the process work?
- Quick enquiry. Fill in our 60 second form. It won’t affect your credit score.
- Chat with a lending specialist. They’ll ask about the property, the amount and your plan to repay.
- Outline of terms. You’ll get the loan amount, term and costs, priced on your circumstances.
- Valuation and documents. ID, property details and your home loan statement. No financials.
- Sign and settle. Documents signed, security registered and money paid, in as little as 24 hours in some cases.
What if the property is owned by a family member?
A guarantor, such as a parent, sibling or business partner, can offer their property as security. It’s a big ask. They’re taking on real risk, so they should understand the loan, the term and the exit, and get independent legal advice before they sign. Many families treat it as a short, clearly defined arrangement with a set end date.
Example: A young electrician in Hobart has won a contract to fit out a small office and warehouse unit but needs $60,000 for switchboards, cable and wages up front. He doesn’t own property yet. His parents agree to support a 6 month second mortgage over their home, with repayment from the builder’s progress claims. The loan is repaid in month five.
Key facts
- Loan size: $20,000 to $5 million
- Security: your home, investment property, commercial property or land with equity, or a guarantor’s property
- Speed: as little as 24 hours in some cases; typically a few days once valuation and documents are in
- Term: typically 1 to 12 months
- Paperwork: no financials or cash flow records
- Credit: bad credit considered
Ready to put your equity to work?
If your property has equity and your business needs cash, start your application in about 60 seconds. There’s no cost to enquire, it won’t affect your credit score, and a lending specialist will call you back. We’ll tell you quickly if we can help.
