When to Refinance and Access Equity for Business

Your home likely holds more capital than your offset account, and if you're running or starting a business, accessing that equity through refinancing could be the most cost-effective funding option available.

Refinancing to release equity means increasing your loan amount against the value of your property and taking the difference as cash. Lenders typically allow you to borrow up to 80% of your property's value without paying lenders mortgage insurance, though some will go higher depending on your circumstances. The funds come out at settlement and can be directed toward business investment, working capital, or equipment purchases.

How Equity Release Actually Works

You borrow against the portion of your property you own outright. If your Merricks property is worth $1.2 million and you owe $600,000, you have $600,000 in equity. A lender will usually let you access up to 80% of the property value, meaning you could refinance to a loan of $960,000, releasing $360,000 in cash while keeping your loan-to-value ratio at a level that avoids additional insurance costs.

The application process mirrors a standard refinance, but with extra scrutiny on how the funds will be used. Lenders want to see a business plan, projected cash flow, and evidence that the business can service any additional debt it takes on. If you're an established operator with two years of financials, the conversation is straightforward. If you're pre-revenue, expect more questions and possibly a higher rate or lower approval amount.

Serviceability Becomes the Constraint

You might have equity, but that doesn't mean a lender will release it. Serviceability tests whether your household income can support the higher loan amount, and if your business income is new or inconsistent, lenders discount it heavily. In our experience, clients with a stable wage and a side business find approval much simpler than sole traders trying to scale, even when both have identical equity positions.

Consider a Merricks buyer who owns a coastal property outright and wants to access $400,000 to expand a hospitality business. The equity is there, but without two full years of ABN trading history and tax returns showing consistent profit, most lenders will either decline or offer a reduced amount based solely on PAYG income if there is any. The solution often involves splitting the application, refinancing part of the equity now while the business builds a financial track record, then accessing the remainder six to twelve months later once serviceability improves.

Fixed Rate Expiry and Refinance Timing

If you're coming off a fixed rate period, the timing aligns naturally with an equity release. Your loan reverts to a variable rate, often higher than what's available elsewhere, and refinancing lets you access equity while also moving to a more competitive structure. Waiting until after your fixed term ends avoids break costs entirely, and the valuation required for refinancing gives you an updated view of how much equity is actually available.

Some clients assume they need to wait until their fixed term expires to do anything, but if the business opportunity is time-sensitive and the break cost is modest relative to the funding need, refinancing early could still make sense. The calculation depends on the remaining fixed period, the rate differential, and what delaying the business investment would cost in lost revenue or competitive position.

Tax Treatment and Loan Structure

How you structure the loan affects how much of the interest you can claim. If you're accessing equity for business purposes, that portion of the loan is typically tax-deductible, while the portion tied to your private residence is not. Splitting the loan into two accounts, one for the original home debt and one for the equity drawdown, keeps the deductibility clean and makes your accountant's job significantly easier at tax time.

This isn't advice on what you can or can't claim, that sits with your accountant, but the structure you choose at settlement determines what's even possible. Mixing the funds into a single loan account muddies the trail, and while some accountants can work backwards to apportion interest, it's harder to defend if questioned. Setting it up correctly from the start avoids that entirely.

Valuation Risk in Coastal Pockets

Merricks sits in a market where property values can fluctuate with seasonal demand and broader sentiment around coastal lifestyle assets. If you're relying on a valuation to unlock a specific amount of equity, understand that the lender's valuer may come in lower than recent sales suggest, particularly if comparable sales are thin or your property has unique characteristics that make it harder to benchmark.

A conservative valuation can reduce the amount you're able to access, sometimes by tens of thousands of dollars. If the valuation falls short and you need a specific figure to proceed with the business investment, your options are to either challenge the valuation with additional comparables, wait for more sales data to emerge, or adjust the business plan to suit the available funding. None of those are ideal mid-application, which is why having a buffer in your funding requirement, or a backup plan, matters.

Lender Appetite for Business Lending

Not all lenders view business equity release the same way. Some have dedicated small business arms and are comfortable with the risk profile, others treat it as higher-risk consumer lending and price accordingly. The difference in rate and fees can be significant, and the wrong lender choice can cost you thousands annually or result in a decline when approval was entirely feasible elsewhere.

In our experience, clients who approach their existing lender first often get a generic response that doesn't reflect what's actually available across the market. A broker with access to multiple lenders can position the application with the lender most likely to approve at a competitive rate, rather than hoping your current bank sees the opportunity the way you do.

When Refinancing Makes Sense and When It Doesn't

Refinancing to access equity works when the numbers support it. Your property has sufficient equity, your income can service the higher loan, and the cost of borrowing is lower than alternative funding sources like unsecured business loans or equity investors. It stops making sense when serviceability is borderline, the valuation is uncertain, or the business case is speculative enough that risking your home feels disproportionate.

If you're unsure whether refinancing is the right move, a home loan health check can clarify where you sit. It reviews your current loan structure, equity position, and serviceability, and gives you a clear view of what's possible before you commit to a full application.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions