Quick answer
Selling a property releases all its equity but takes weeks to months, costs agent fees and may trigger capital gains tax. Borrowing against it with a second mortgage is faster, keeps the asset and its future growth, but adds interest and needs an exit. Many owners combine them: borrow now to meet the deadline, then sell on their own timeline rather than at a forced price.
Key points
- Selling releases more money but takes longer and has transaction costs.
- Borrowing is faster and keeps the property, but costs interest and needs an exit.
- Capital gains tax can reduce the net proceeds of a sale; the CGT discount rules differ for individuals, trusts and companies.
- Borrowing first and selling later avoids a rushed sale.
A business needs a significant sum. The owner also holds a property: an investment unit, a block of land, commercial premises or a holiday house. Two levers are available. Sell the property and use the proceeds, or keep it and borrow against it. Plenty of owners default to one or the other without comparing them properly.
This guide lays out how each option works, what it costs, how long it takes, and a simple framework for choosing, including the combined approach many owners end up using.
How do the two options compare?
| Sell the property | Borrow against it (second mortgage) | |
|---|---|---|
| Money released | Most of the equity, after costs and tax | Usable equity only, at a comfortable LVR |
| Speed | Weeks to months (campaign plus settlement) | Days; same day possible for $20k–$250k |
| Upfront costs | Agent commission, marketing, legal | Establishment, legal, valuation |
| Ongoing costs | None (the loan on it is repaid) | Interest until repaid |
| Tax | CGT may apply on sale | No CGT from borrowing itself |
| Future growth and income | Given up | Kept |
| Control over price | Depends on timing and market | Not affected |
| Reversibility | Final | Repaid when the exit arrives |
When does selling make more sense?
- The need is large and permanent. A major expansion or buyout that won’t be repaid from trading in a reasonable time.
- The property is underperforming. Low rent, high holding costs, or you’d sell anyway in the near future.
- Time is on your side. You can run a proper campaign without a deadline forcing the price.
- You want to reduce overall debt. Selling removes a loan rather than adding one.
When does borrowing make more sense?
- The need is urgent. A deadline in days or weeks can’t wait for a sale campaign.
- The need is temporary. Tax debt, a working-capital gap or a contract that pays in months. See second mortgage working capital.
- The property is a good long-term asset. Selling would give up future growth or rent you’d rather keep.
- The market timing is poor. Selling into a soft market to meet a deadline can cost more than the interest on a loan.
- CGT would be significant and you’d rather choose when to realise it.
Unsure which fits? Describe the need and the property and a specialist will set out both paths.
How does tax change the maths?
Tax is often the deciding factor, and it’s worth having your accountant run the numbers before you choose.
Selling. If the property isn’t your main residence, a sale may produce a capital gain. The ATO explains that to use the CGT discount you must have owned the asset for at least 12 months before the CGT event; individuals and Australian trusts can then generally reduce the gain by 50%, while companies can’t use the CGT discount at all. Who owns the property therefore affects how much of the sale price you actually keep.
Borrowing. Borrowing against a property isn’t a sale and doesn’t create a capital gain. Whether the interest is deductible generally depends on what the borrowed money is used for, and for a genuine business purpose it may well be; again, confirm with your accountant.
ATO debt. If the business need is a tax debt, remember the ATO’s own position: general interest charge incurred from 1 July 2025 is no longer deductible, and debts on a payment plan keep accruing GIC. That can tilt the comparison towards clearing the debt quickly. See second mortgages for ATO debt.
What does the combined approach look like?
Many owners don’t choose one or the other. They borrow first, then sell:
- A second mortgage over the property (or another property) meets the immediate need within days.
- The property is prepared and listed at a sensible time, with a proper campaign.
- On settlement, both mortgages are repaid from the proceeds and the balance comes to the owner.
This keeps control of the sale price and timing, while the business deadline is met straight away. The second mortgage’s term covers the sale campaign and settlement with a margin, and the sale is its exit plan. The mechanics of this approach are covered in more depth on our second mortgage bridging page.
What are the costs to compare?
Put both options in dollars over the same timeframe.
Selling: agent commission, marketing, legal and conveyancing, any mortgage discharge fees, CGT (if applicable), and the future rent and growth you give up.
Borrowing: establishment, legal and valuation fees, interest over the expected term, and discharge fees at the end. Our page on second mortgage costs lists each one.
Combined: the borrowing costs for the bridge period, plus the selling costs, minus the price improvement you might achieve by not selling in a hurry.
What about the family home?
The family home is usually a different conversation. Selling it to fund a business is a major life decision, and most owners would rather not. The tax treatment of a main residence is also generally different from an investment property, so the CGT comparison above may not apply in the same way; your accountant can confirm your position. For most households, the realistic choice with the home is between borrowing against it and not using it at all. Our page on second mortgages over residential property covers how to do that with the household’s interests in mind.
What if the property is held in a company or trust?
The same framework applies, but tax and signing change. A company selling property can’t use the CGT discount, as the ATO notes, so the net proceeds of a sale may be lower than an individual would receive on the same gain. A trust’s position depends on its deed and distributions. On the borrowing side, the trustee or company signs the mortgage and directors or controllers usually guarantee. See trust or company property for the paperwork.
A simple decision framework
Answer these five questions honestly:
- When do I need the money? Days points to borrowing (at least first). Months leaves both open.
- Is the need temporary or permanent? Temporary favours borrowing; permanent favours selling.
- Would I sell this property in the next two years anyway? If yes, the combined approach often wins.
- What would CGT look like? Ask your accountant for an estimate.
- How comfortable is the equity? Check with our equity and LVR calculator. If borrowing would stretch the combined LVR, selling or a smaller loan may be wiser.
Illustrative example: borrowing first, selling on time
A builder needs $300,000 within a fortnight to fund materials on two new projects. He owns an investment townhouse that he’s planned to sell next year. Listing immediately in a slow month would mean a rushed campaign. Instead, a second mortgage over the townhouse funds the materials within days, with interest capitalised and a nine-month term. He lists in spring, sells at a price he’s happy with, and both loans are repaid at settlement. His accountant had already estimated the CGT, so the net proceeds were no surprise. The scenario is illustrative.
Illustrative example: selling was the better answer
A retailer needs $500,000 to buy out a departing partner. Her commercial property is leased at a modest yield and she’d been considering selling for some time. There’s no urgent deadline; the partner agrees to a four-month settlement. Selling releases enough to fund the buyout and clear the property’s existing loan, leaving the business with less debt overall. Borrowing would have worked, but selling suited the long-term plan better. The scenario is illustrative.
Weighing up both? Let’s put numbers to each
The right answer depends on your timing, your property and your tax position, and a specialist can set out the borrowing side clearly so you and your accountant can compare. The enquiry takes about 60 seconds, and no credit check is run when you first enquire.
We don’t pass your details around a crowd of lenders. One specialist looks at the property, the need and your timeline, then calls you back. Please give an honest view of the property’s value and what’s owed on it; realistic numbers are what make the comparison with a sale meaningful.
Frequently asked questions
Is it better to sell or borrow to fund a business?
It depends on how much you need, how fast, whether the need is temporary, how the property is performing and the tax position. Selling suits large, permanent needs with time to spare; borrowing suits urgent or temporary needs.
How does capital gains tax affect selling?
If the property isn't your main residence, a capital gain on sale may be taxable. The ATO explains that individuals and trusts that have held an asset for at least 12 months can generally reduce the gain by 50%, while companies can't use that discount.
Can I borrow now and sell later?
Yes. A second mortgage can bridge until a sale on your timeline, with the sale as the exit. Set the loan term with a margin for the campaign and settlement.
Does borrowing against a property affect its CGT?
Borrowing itself isn't a sale, so it doesn't trigger CGT. Tax on the eventual sale depends on the property and your circumstances; ask your accountant.