How much of my property's equity can I borrow against for my business?

What’s the difference between equity and usable equity?

Equity is simple arithmetic: the property’s value minus everything already owed against it. A property valued at $1,000,000 with a $400,000 mortgage has $600,000 of equity.

Usable equity is the part a lender will actually lend against. Lenders cap the total debt secured on a property with a loan-to-value ratio (LVR) limit. If the combined debt — existing mortgage plus new business loan — would exceed that limit, the new loan is reduced to fit.

So the useful question isn’t “how much equity do I have?” but “how much room is there between what I owe and the lender’s cap?”

How do I estimate my usable equity?

Use this four-line walk-through. The LVR figure below is purely an illustrative assumption, not a policy or a promise — every lender, loan type and property sets its own limit.

Step	Illustrative figure
Property value (lender’s assessment)	$1,000,000
Assumed maximum combined LVR for this example	70% → $700,000 cap
Less existing mortgage	– $400,000
Usable equity (room under the cap)	$300,000

Illustrative only. A real lender may assess the value differently and apply a different limit.

In this example, a business loan of up to about $300,000 could fit under the cap. If the owner needed $450,000, the options would be a larger property, a second property, or a loan combining property security with other support.

First mortgage, second mortgage or caveat — which applies?

Where your new loan sits in the queue behind other lenders changes how it works.

Position	What it means	Typical use
First mortgage	New lender is first in line; any existing loan is usually repaid	Unencumbered property, or refinancing the existing loan
Second mortgage	New lender ranks behind your existing lender	Keeping your home loan in place while accessing extra equity
Caveat	Lender lodges a caveat on title as security, usually short term	Short-term needs with a clear repayment event

Second mortgages and caveats let you tap equity without disturbing a fixed or low-cost first mortgage. Because the lender ranks behind someone else, these tend to be priced higher and are usually used for shorter, specific purposes. We explain the paperwork side in what happens at settlement.

What reduces the equity a lender will count?

• Valuation surprises. The lender’s valuation can come in below your expectation, especially in a soft market or for unusual property.
• Property type. Vacant land, rural holdings, specialised buildings and some apartments are often treated more conservatively.
• Location. Easy-to-sell property in established areas is favoured over remote or thinly traded locations.
• Existing arrears. Missed payments on the current mortgage are a warning sign regardless of equity.
• Title issues. Existing caveats, co-owners who aren’t part of the application, or unusual ownership structures all need resolving first.

Knowing these early saves time. When you tell us about the property upfront, a real person can flag anything that might affect the numbers before valuations are ordered.

How is the loan repaid if it’s secured on property?

Property is security, not the repayment plan. Lenders still want to know where the money comes from to repay — trading income, the sale of a property or business asset, a refinance to a longer-term lender, or a large receivable. For short-term property-secured loans this “exit” matters as much as the equity. Our guide to how long you can borrow for explains how terms and exits fit together.

What will the lender ask about the property?

Expect a short list of practical questions early on, and answer them as precisely as you can:

• Who is on title? Every registered owner will need to be part of the loan, either as a borrower or as a guarantor and mortgagor.
• What’s owed, and to whom? The lender, the approximate balance and whether repayments are up to date. A recent statement answers this quickly.
• What kind of property is it? House, unit, townhouse, vacant land, shop, warehouse, farm — and whether anyone lives in it or leases it.
• Roughly what is it worth? Your honest estimate helps pick the right valuation approach, even though the lender will rely on its own figure.
• Are there other interests on title? Existing caveats, easements or disputes need to be known upfront.

None of this requires a credit check, and having the answers ready usually shortens the whole process by days rather than hours.

Can I use more than one property?

Yes. Where one property doesn’t have enough room under the lender’s cap, a second property can be added as security. The same checks apply to each property, and every owner of each property needs to be involved. Spreading security across two properties can also let you keep the combined debt on each one at a more comfortable level, which some owners prefer even when a single property would technically be enough. If you’re thinking about what else could back a loan, see what you can use as security.

Is using property equity for my business a good idea?

It can be the difference between a loan that works and one that doesn’t: larger amounts, longer terms and more flexibility on credit history. The trade-off is that the property is at risk if the loan isn’t repaid. Consider:

• Is the purpose likely to generate the repayments, or to solve a problem that would otherwise cost more?
• Does everyone on title understand and agree?
• Is there a fallback if trading dips?

If the property is your home, read using your home for a business loan for the extra points worth talking through at home first.

Find out how much of your equity is usable

A quick conversation can tell you roughly where you stand before anyone orders a valuation. Enquiring involves no credit check, your details go to one team rather than being scattered across lenders, and a real person looks at the property, the existing mortgage and your purpose together. Give accurate figures for the property’s likely value and what’s owed on it, so the estimate you hear is realistic from the start.

Check your usable equity with a specialist →