Company Home Loans

It’s important to know the advantages and disadvantages of buying property in your company’s name.  Find out more with Savvy!

Last updated on April 20th, 2022 at 05:17 pm by Cate Cook

Buying a property in your company name

Company home loans are a bit of a contradiction because, by definition, some lenders treat company loans as business loans, not home loans.  However, a company can be the legal owner of a residential property, and this is where the phrase ‘company home loans’ originates from.  You can find clear and concise loan comparison information with Savvy, which can help you make the smartest financial decisions about your finance needs.

What are company home loans?

A company home loan is a loan applied for by the director or directors of a company, in the name of the company, to buy a residential property.  If the loan is approved and settlement takes place, the company will own the property and all directors of the company will be guarantors for the loan.  The company can either buy the property in its own right or as a Trustee for a Trust. 

There can be several reasons to take out a home loan through your company, most of which are related to taxation and risk management reasons.  These could include:

  • wishing to reduce personal risk
  • wishing to separate assets from personal ownership
  • the company is acting as a Trustee for a Trust
  • the company is a holding entity for risk mitigation reasons
  • there are taxation benefits from the company ownership of the property, such as being able to claim any losses as a tax deduction

What documentation will be required to apply for a company home loan?

Lenders will require a wide range of documentation before approving you to buy a property in your company name.  They will need all the usual documents proving ID, income, assets and liabilities of all the individual directors of the company, plus documentation about the ownership, management and profitability of the company itself.  You can use Savvy’s budget planner to record all your personal assets, liabilities and expenses in one document to make your loan application easier.

These are the documents you may be asked to provide for your company relating to the past two financial years:

  • company tax returns
  • ATO Notice of Assessments
  • company profit and loss statements
  • company Business Activity Statements (BAS) for eight reporting periods (if your company reports quarterly)

In addition, lenders will want to see:

  • details of the company structure and list of company directors
  • Australian Company Number (ACN) and Australian Business Number (ABN) registration certificates
  • if your company is acting as a Trustee for a Trust, the Trust Deeds

Many of the big banks won’t approve a home loan in a company name and will instead treat such an application as a business or investment loan.  However, some online lenders do offer home loans to companies, so it’s well worth comparing the products offered by different lenders with Savvy.  Alternatively, you may wish to consult a mortgage broker to find out the best lender to approach for your company home loan.

Is buying property in a company name the best option for me?

This will largely depend on your personal circumstances and the reasons for buying a property in a company name.  If you are the director of a small company with just one of two directors (such as a husband-and-wife company) it may be a sensible decision to separate your primary residence from personal ownership just in case you are sued or your business goes bankrupt.  Having your home in a company name can provide you with some protection in these circumstances. 

However, the benefits to be gained from this potential risk reduction need to be weighed up against other tax considerations too.  If the property is your investment property, you may lose Capital Gains Tax (CGT) advantages when you go to sell it.  This is because of Australian Taxation Office rules about CGT, which are:

  • Australian Trusts can claim a 50% CGT discount
  • Self-Managed Super Funds can claim a 33.33% CGT discount
  • limited companies can’t claim any CGT discount

Therefore, you lose the 50% CGT discount advantage by buying your investment property through your company.  It’s always worth seeking financial advice from your accountant or a tax specialist before buying property in a company name.

Frequently asked questions about company home loans

Do company home loans attract a higher interest rate?

No – if a lender is prepared to approve a home loan in a company name, and the company’s financial record looks healthy, the lender should not charge a higher interest rate for a standard home loan.  This is also because the nature of the asset is the same as a standard residential home loan.  However, if the lender decides to treat the loan as an investment property home loan, a higher interest rate may be applied (as with all property investment loans).

Are all company directors equally liable for a home loan in the company name?

Yes – all company directors are ‘jointly and severally liable’ as guarantors for any loans taken out in the name of the company (under Australian company legislation), so if there’s any possibility of a default, the lender can ask any or all of the directors to repay the loan. It would be up to the lender which directors they decided to pursue for loan repayment.

Do shareholders of a company have to be guarantors for a company loan?

No – it’s only the directors of a company who have to act as guarantors for a loan taken out in the company name.  Generally, shareholders do not have to act as guarantors for home loans.  The exception to this would be in a situation where the company only has one or two major shareholders (who are not company directors) who own the majority of company shares.  In this case, the majority shareholders may be asked to provide a personal guarantee for the loan.

Can I switch the ownership of the property from my company name to my name later on?

Yes – although this will involve some expense and administration because the legal owner of the property will have to be changed on the Certificate of Title, as well as on official loan documents with your lender.  You will need to contact a conveyancer to assist you with this process and advise you how much it will cost.

Can I set up a company with my parents as joint directors to get loan approval?

In theory, this could be one way of your parents effectively acting as guarantors for your home loan.  However, it’s important to remember that two years’ worth of business financials will be required by the lender before approving the residential loan. Because of this, you’d have to wait at least two years and prove you’re running a profitable company for this move to be successful, rather than simply being able to set it up directly before your application.  Use this borrowing power calculator to see how much you could potentially borrow as an individual or couple based on your current income.