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Leveraging Home Equity to Invest in Business Shares: What You Need to Know

If you've invested significant time into a business, you may see the benefit of owning shares in said company. This is how you can leverage your home equity to do so.

For many individuals, the prospect of buying shares in a business they are involved in is both enticing and a testament to their confidence in their workplace.

However, navigating this financial move involves a strategic approach, particularly when considering the utilization of home equity. It's crucial to understand that purchasing shares in a business using home equity is treated as a mortgage top-up. The standard guidelines dictate that clients can top up their mortgage to a maximum of 80%.

Several variables influence a bank's decision when an individual seeks to invest in business shares. The first consideration is the percentage of shares one intends to purchase. Additionally, having a shareholder's agreement in place is pivotal. The bank assesses whether the individual remains employed or becomes self-employed post the share acquisition, as this distinction holds weight in their lending assessment.

The bank scrutinizes various aspects, including the sales and purchase agreement related to the shares. However, a critical aspect revolves around the individual's ability to service the increased borrowing due to the share acquisition. This scenario poses an intriguing dynamic. Suppose an individual seeks to borrow $250,000 for share purchase, an amount their current salary alone might not cover. In such cases, demonstrating the company's profit and dividends, which could potentially contribute to the individual's income, plays a crucial role in bolstering loan approval prospects.

Buying shares in a business utilizing home equity involves multiple considerations. It's contingent upon the business's performance, the borrower's current income structure, and the potential dividends expected from the share investment.

At NZ Mortgages, our expert team understands the complexities and significance of such financial moves. We provide tailored advice and solutions to assist individuals in navigating the intricate process of leveraging home equity to invest in business shares.

Exploring the possibility of using home equity to invest in business shares? Connect with our team at NZ Mortgages for personalized guidance tailored to your unique financial situation.

Keywords: Business Shares, Home Equity, Mortgage Top-Up, Investment Strategies, NZ Mortgages