As a tradie, you've likely built up solid equity in your home over the years. What you might not realise is that this equity could be the key to growing your business or investing in new opportunities.
Refinancing to access equity is becoming increasingly popular among Australian tradies who want to leverage their property wealth for business purposes. Let's explore how this works and whether it might be right for your financial situation.
What does releasing equity in your property mean?
Equity is the difference between what your property is worth today and what you still owe on your home loan. For example, if your house is valued at $800,000 and you owe $400,000 on your mortgage, you have $400,000 in equity.
When you refinance to access equity, you're essentially borrowing against this value. Most lenders will allow you to access up to 80% of your property's value, minus what you currently owe.
Why tradies are choosing to release equity for business
Many tradies find themselves in a position where their business needs capital, but traditional business loans come with higher interest rates and stricter requirements. Refinancing your home loan to access equity often provides:
• Lower interest rates compared to business loans
• Larger loan amounts based on property value
• More flexible repayment terms
• Access loan options from banks and lenders across Australia
Whether you want to buy new equipment, expand your team, purchase a work vehicle, or even release equity to buy the next property for investment purposes, accessing your home equity can provide the funds you need.
How the refinancing process works
The application process for refinancing to access equity involves several steps:
- Property valuation - Your lender will assess your property's current market value
- Financial assessment - You'll need to provide bank statements and demonstrate your ability to service the new loan amount
- Loan structure review - Decide whether you want a variable interest rate, fixed interest rate, or a combination of both
- Application submission - Complete the streamlined application process with your chosen lender
Timing considerations for your refinance
Many tradies find refinancing particularly attractive when their fixed rate period ending approaches. This presents an opportunity to not only access equity but also potentially access a lower interest rate or change your loan term.
A home loan health check can reveal whether refinance interest rates currently available might reduce your existing repayments, even with the additional borrowing.
Additional benefits of refinancing
Beyond accessing equity for business purposes, refinancing can help you:
• Consolidate debts into one manageable payment
• Reduce loan repayments through extended terms or lower rates
• Access better loan options that weren't available when you first bought
• Check eligibility for special lender policies that suit tradies
Important factors to consider
While accessing equity through refinancing can be advantageous, it's crucial to consider:
Increased debt: You'll be borrowing more against your home, which means higher monthly repayments and more interest paid over time.
Market risks: Property values can fluctuate, potentially affecting your equity position.
Business risks: Using home equity for business purposes means your home secures both personal and business debts.
Making the right choice for your situation
Every tradie's financial situation is unique. What works for a plumber looking to expand their team might not suit a carpenter wanting to buy equipment. The key is understanding your options and choosing a loan structure that supports your business goals while protecting your family home.
Consider factors like:
• How much equity you actually need to access
• Whether you prefer the predictability of a fixed interest rate or flexibility of a variable interest rate
• Your business's cash flow and ability to service increased repayments
• Your long-term business and personal financial goals
Refinancing to access equity isn't just about getting funds – it's about positioning yourself for business growth while maintaining financial stability. With the right approach and professional guidance, your home equity could become the foundation for taking your trade business to the next level.
Call one of our team or book an appointment at a time that works for you to discuss how refinancing could help unlock your property's potential for business growth.
