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Local Knowledge Finance

Can I consolidate business debt into my home loan?

Short answer

Sometimes. Some lenders will refinance business debts, such as tax debt, overdrafts or equipment loans, into a loan secured by your home, after a full assessment. It can lower regular repayments, but it puts your home behind business debt and can cost more over a longer term. Compare the alternatives before deciding.

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This answer is awaiting review by James Chee CPA. Written by Local Knowledge Finance editorial team. Check the dated sources below and talk to a broker about your own situation.

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What lenders will want to see

  • Moneysmart warns that consolidating into a longer loan can cost more in total and turns unsecured debt into debt secured against your home. [Moneysmart (ASIC)]
  • For tax, interest deductibility generally follows what the borrowed money is used for, not the asset securing it. [ATO]
  • Financial counselling is available at no cost through the National Debt Helpline. [National Debt Helpline]

Who this may suit

  • Owners whose business is now profitable and who want a simpler repayment structure
  • Borrowers with equity who accept the risk to their home

Who it may not suit

  • Businesses still losing money: new debt does not fix the cause
  • Anyone who would struggle if business income fell again

Your options, including not borrowing

  • Keep business debts in the business and do not borrow against your home.
  • Negotiate with creditors or the ATO for a payment arrangement. [ATO]
  • Refinance the debt as business or commercial lending, keeping your home out of it where possible.
  • Consolidate into the home loan in a separate split, paid off faster than the home loan.

Risks to weigh

  • If repayments stop, the lender can take action against your home. [Moneysmart (ASIC)]
  • Short-term debt spread over a long term can mean more interest in total. [Moneysmart (ASIC)]
  • Mixing business and private borrowing makes tax records harder to keep. [ATO]

Next steps

  1. 1List every business debt with its balance, repayment and remaining term.
  2. 2Ask your accountant about the tax treatment and business cash flow.
  3. 3Ask us to compare keeping the debts separate with consolidating.

Common follow-up questions

If the business struggles and you cannot keep up repayments, the lender can take action against your home. Short-term business debt becomes long-term debt that can cost more in total, and mixed borrowing complicates tax records.
Deductibility generally follows the use of the borrowed money, not the security. Keep the business portion in its own split and confirm with your tax agent.
Keeping equipment or vehicle debt as asset finance can suit better than moving it onto your home. See our equipment and vehicle finance page.

Sources

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Self-employed home loans Debt consolidation Equipment and vehicle finance Insights

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General information about credit only. It is not tax, financial, superannuation or Centrelink advice and does not take your objectives, financial situation or needs into account. Lender policies change; any loan is subject to lender assessment and approval.

Tax help is a separate service provided by Local Knowledge Pty Ltd, Registered Tax Agent 77912009. Local Knowledge Finance does not give tax advice.

Ding Financial Pty Ltd t/a Local Knowledge Finance, Corporate Authorised Credit Representative 517980 of Global Mutual Funds Pty Ltd (ACL 222640). Sydney · 02 8338 8900 · [email protected]

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