You can use equity in your home to start or grow a business, and the rate is usually lower than for a business loan. The catch is that your home becomes security for a business risk. If you do it, keep the business borrowing in a separate loan split, so the interest stays clearly deductible and the debt is easy to track and repay.

Home equity for a business at a glance
Item Detail
Rate Usually a home loan rate, lower than unsecured business finance
Security Your home
Structure A separate split or line of credit for business use
Interest Generally deductible when used for the business
Assessment Your income and expenses, as for any increase

Why use home equity instead of a business loan?

New businesses often cannot get a business loan without trading history, and unsecured business finance can be expensive. A loan secured on your home is cheaper and simpler. The trade-off is risk: if the business fails and you cannot repay, the home is the security.

How should it be structured?

  • A separate split for the business amount, never mixed with your home loan.
  • A line of credit if the business needs to draw and repay as cash flow changes; see line of credit home loans.
  • Repayments set to clear the business amount over a realistic period.
  • Records showing every draw went to the business.

Is the interest tax deductible?

Generally, interest is deductible when the borrowed money is used to earn assessable income, such as running your business. It follows the use of the money, not the security. Mixing business and private spending in one split makes the deductible share hard to prove, so keep them separate and ask your accountant.

What does the lender ask?

An increase or new split is a new application. The lender checks your income and expenses can support the larger loan, usually based on your current income rather than the business’s forecasts. A new business’s income will not usually count until it has a track record. Some lenders ask you to declare the business purpose, and loans mainly for business purposes are generally not regulated in the same way as consumer home loans. The top-up and refinance article explains the options.

What risks should you think about?

  • The home is at risk if the business cannot repay.
  • Your borrowing power for other purposes falls.
  • A business downturn can coincide with rate rises.
  • Partners and family on the title must agree to the security.

What about buying equipment or vehicles?

Business equipment and vehicles are often better funded with asset finance, secured on the asset rather than your home, with repayments matched to its life.

A worked example

A chef opening a cafe in the Inner West uses a $100,000 split against her home to fund the fit-out and opening costs, rather than an unsecured business loan. She sets repayments to clear it in five years and draws only for the business. Her accountant treats the interest as a business deduction. Her partner, who co-owns the home, signs the loan documents with full knowledge of the risk.

Questions people ask

Can I use my home loan to start a business?

Yes, through a top-up, split or line of credit, if you can afford the larger loan.

Is it risky to use home equity for a business?

Yes, because your home secures the debt. Keep it separate and plan how it is repaid.

Is interest on home equity used for a business deductible?

Generally yes when the money is used in the business. Keep records and ask your accountant.

Charles Touma sets up business borrowing against your home so it is separate, trackable and repayable. A free 30-minute call covers it. General information only, not credit, tax or financial advice; every loan is subject to the lender’s assessment.

Sources: ASIC, Regulatory Guide 209, checked 18 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.