As a current or former Australian Defence Force member, you've likely built up substantial equity in your property over the years. If you're looking to start or expand a business, refinancing to access this equity could be the key to unlocking your entrepreneurial potential.
Understanding Equity Release Through Refinancing
Releasing equity in your property through refinancing allows you to tap into the wealth you've built up in your home without selling it. This strategy involves replacing your current home loan with a new one, typically for a higher loan amount than what you currently owe.
The difference between your new loan amount and existing debt becomes available cash that you can use for business purposes. For ADF members, this approach offers several advantages:
• Access to substantial funding without personal guarantors
• Potential for accessing a lower interest rate than business loans
• Ability to consolidate debts while accessing business capital
• Option to reduce loan repayments through extended loan terms
When Refinancing Makes Sense for Business Funding
Several scenarios make refinancing an attractive option for business funding:
Fixed Rate Period Ending: If your current fixed rate period ending, it's an opportune time to review your options and potentially release equity while securing competitive refinance interest rates.
Changed Financial Situation: Career progression within the ADF or transition to civilian employment may improve your borrowing capacity, enabling access to better loan options.
Property Value Growth: Increased property values mean more available equity to fund your business aspirations.
The Application Process for ADF Members
Working with finance & mortgage brokers who understand the unique circumstances of defence personnel can significantly improve your refinancing experience. These specialists can:
- Check eligibility for special lender policies designed specifically for ADF members
- Access loan options from banks and lenders across Australia that you might not find independently
- Provide a streamlined application process that accommodates military deployment schedules
- Review your financial situation comprehensively to determine optimal loan structures
Documentation Requirements
The application process typically requires:
• Recent bank statements (usually 3-6 months)
• Pay slips or defence pay statements
• Tax returns for self-employed business income
• Property valuation
• Business plan or investment proposal
• Proof of existing debts and commitments
Interest Rate Options and Loan Terms
When refinancing to access equity, you'll need to choose between different rate structures:
Variable Interest Rate: Offers flexibility and potential savings when rates decrease, with the ability to make additional repayments without penalty.
Fixed Interest Rate: Provides certainty with consistent repayments over the fixed period, helping with business cash flow planning.
Many ADF members opt for a split loan structure, combining both variable and fixed portions to balance security with flexibility.
Maximising Your Refinancing Strategy
To make the most of your equity release:
Consider Your Loan Term: You can change your loan term when refinancing. A longer term reduces monthly repayments but increases total interest paid, while shorter terms build equity faster.
Debt Consolidation: Use the opportunity to consolidate debts into your mortgage, potentially reducing overall interest costs.
Future Planning: Some ADF members use equity release not just for business but also to release equity to buy the next property, creating multiple investment streams.
Risks and Considerations
While accessing equity can provide substantial business funding, it's important to understand the implications:
• Your home becomes security for business activities
• Increased loan amount means higher total interest payments
• Business success becomes crucial for maintaining mortgage repayments
• Market fluctuations could affect property values and available equity
Defence-Specific Advantages
ADF members often have access to:
• Specialised lender policies with reduced fees
• More flexible serviceability criteria recognising military allowances
• Deployment-friendly application processes
• Access to investment property loans with lower deposit requirements
Making the Right Decision
Before proceeding with refinancing for business purposes, consider:
- Business viability: Ensure your business plan demonstrates realistic profit projections
- Alternative funding: Compare equity release costs against business loans or other funding sources
- Exit strategies: Plan how you'll repay the additional borrowing if business plans change
- Professional advice: Consult with accountants and financial advisors alongside mortgage specialists
Refinancing to access equity can provide ADF members with substantial funding for business ventures while potentially improving overall loan conditions. However, success depends on careful planning, understanding your financial situation, and working with professionals who understand both the opportunities and challenges facing defence personnel.
The combination of stable military income, property equity growth, and specialised lending policies creates unique opportunities for current and former ADF members to build wealth through business investment.
Call one of our team or book an appointment at a time that works for you to explore how refinancing could unlock your business potential while optimising your overall financial position.
