Can you remortgage to fund a business?

Some homeowners consider remortgaging to raise money to start, grow or support a business, using the equity in their home rather than a business loan or investor funding. It’s possible with some lenders, but it’s treated more cautiously than borrowing for something like home improvements, because it puts your home at risk against a commercial venture rather than the property itself.

If you’re weighing this up, understanding how lenders view it, and the risks involved, matters as much as knowing whether it’s technically possible.

Will a lender let you remortgage for this reason?

It depends on the lender. Residential mortgages are designed for lending on your home, and using the funds for a business purpose sits outside what many lenders are comfortable with, particularly if the business is new or unproven. Some lenders:

• decline this purpose outright on a standard residential mortgage
• consider it case by case, often wanting more detail about the business and how the funds will be used
• treat it more cautiously if you’re a director taking money out as a loan to your own limited company

Our guide on how releasing equity works explains the general mechanics of raising money through a remortgage, which apply here too, alongside the extra scrutiny around the purpose.

What will a lender want to know?

If a lender is willing to consider lending for business purposes, it’s likely to ask about:

Being able to explain clearly what the money is for, and how it fits into your wider finances, tends to help, whichever lender you approach.

What are the risks of remortgaging to fund a business?

This is the point regulated advisers must raise, and it’s worth taking seriously before deciding:

• Your home is the security. If the business struggles and you can’t keep up mortgage payments, you risk losing your home, not just the business investment.
• A longer mortgage term can mean paying more overall, even if the extra amount released feels manageable month to month.
• Business income can be unpredictable, especially in the early years, which can make repayments harder to sustain than a fixed personal use of funds.
• It mixes personal and business risk together, which some business owners prefer to keep separate.

If the business doesn’t need the full amount immediately, releasing less, or considering a business-specific funding route instead, is worth discussing with an adviser.

Is a business loan or other funding a better option?

It depends on your situation. Business loans, and other business finance, don’t put your home directly at risk in the same way a secured remortgage does, but they can be harder to obtain, especially for a new business, and may come with different costs. Some business owners use a mix: a modest amount released from a remortgage alongside other funding, rather than relying on the home alone. This is a decision worth taking independent advice on, ideally from someone who understands both mortgages and business finance.

What if you’re self-employed and want to remortgage for your business?

If you’re self-employed and want to remortgage partly to invest in your own business, lenders will usually still assess your personal affordability using your own income from the business, such as salary, dividends, retained profits or day rate, depending on your structure. Our page on self-employed remortgages with bad credit explains how income is typically assessed. This is separate from, but related to, the question of using the released funds for the business itself.

What does this mean if you’re remortgaging with bad credit?

Combining a higher-risk borrowing purpose with adverse credit on your file, such as a CCJ, default or mortgage arrears, can make lenders more cautious on both fronts at once. It’s not necessarily impossible, but the pool of lenders willing to consider it is likely to be narrower, and a specialist adviser who understands both adverse credit lending and business-purpose borrowing is worth involving early.

Whatever you decide, remember that securing business borrowing against your home increases what’s at stake if things don’t go to plan, so it’s worth getting independent advice about the business funding itself, not just the mortgage. If you’re also dealing with existing debts, free guidance is available from MoneyHelper and StepChange.

How much might a lender let you release for this purpose?

There’s no fixed figure, since it depends on your equity, income, existing debts and the lender’s own appetite for this type of purpose. A lender is likely to want to see that the amount requested is proportionate and clearly explained, rather than an open-ended sum. Our page on releasing equity with bad credit covers the general factors that affect how much can typically be released, which apply here alongside the extra scrutiny of a business purpose.

Should you get advice before deciding?

Yes. Because this decision touches both your mortgage and your business, it’s worth speaking to a mortgage adviser about whether a lender will support the borrowing, and separately to an accountant or business adviser about whether it’s the right way to fund your business at all. Treating the two as connected but separate questions tends to lead to a clearer decision than looking at the mortgage side alone. A specialist adviser experienced with adverse credit and less conventional borrowing purposes can also flag which lenders are realistically worth approaching, rather than applying speculatively and risking an unnecessary hard search on your file.