Yes, it may be possible. Some low-doc loans allow you to borrow against your home to fund business needs. The lender must still accept what the money will be used for, the property offered as security and your ability to repay the debt.
Low-doc describes how your income is assessed. It does not mean you can borrow simply because your home has increased in value. You still need evidence of your financial position, even if it comes from business records rather than the usual tax-return package.
Is my equity the amount I can take out?
No. Equity is the difference between your property's value and the debt secured against it. It is not a cash balance you can withdraw.
To release some of that equity, you take on additional borrowing. The amount available depends on the lender's valuation, how much it is prepared to lend against the property and what you can afford to repay. Existing debt also needs to be taken into account.
If the arrangement replaces your current mortgage, part of the new loan will pay out that mortgage. Fees and other transaction costs may further reduce the funds left for your business. Ask for the amount you would actually receive, not just the total proposed loan.
What will the lender want to understand?
Start with a clear explanation of the business need, how much money is required and how it will be repaid. Funding day-to-day operations and funding a longer-term investment create different cash-flow questions.
Be ready to discuss:
- The specific use of the money and any records that explain the expense.
- Your current mortgage and other personal or business debts.
- The income available for repayments and how it varies through the year.
- The property being offered as security and who owns it.
Income evidence might include business bank statements, BAS or an accountant's letter. The documents and periods required depend on the application. A lender accepting one type of evidence does not automatically mean it accepts the proposed use of the funds.
What does it mean for my home and repayments?
Business funding secured against your home puts the property at risk if you cannot keep up with the repayments. That remains true even if the money has already been spent or the business earns less than expected.
Consider how you would meet the repayments during a quieter trading period. Compare the total debt, fees and repayment term, as well as the monthly payment. A repayment that looks manageable over a long term can still leave you paying for a business expense well after it has served its purpose.
The home is the security; the business is the reason for borrowing. The legal protections that apply can depend on the actual purpose and structure of the loan. If the proposal combines home and business borrowing, have the arrangement explained and seek independent legal advice where needed before signing.
Where should I start?
Bring together your current mortgage details, available business-income records and a short explanation of what you want to fund. Decide how much the business needs and how the additional debt would be repaid.
Flexdoc can discuss the proposed borrowing and the questions that need to be resolved. Confirm the available funds, costs and conditions before making a business commitment that depends on the loan.
General information only, not personal credit, financial, tax or legal advice. Approval and loan terms depend on the lender's assessment of your circumstances.