Arguments Against Using Your Mortgage to Fund a Business
Your home is the place where you live. If your business were to fail (as many do in their first year, and even more do in their first five years), then your home is also at risk. It might be better to avoid taking out a loan against your home just to start a business.
There are other reasons, too, why you might want to avoid mortgaging your home to fund a business. First, it blurs the line between profits your business makes and your own money. Why? Because your profits will need to help pay back your mortgage. What happens when you have to choose during a slow month whether you will pay employees or pay your mortgage broker back?
Another reason you might want to avoid taking out a mortgage to fund your business is that you might want to avoid having to pay more back than you borrowed through interest.
Finally, even though you will have collateral (your home) it may still be difficult to obtain the money you need to start your business. For example, your lender may not be convinced that your business idea is solid enough to bring in a profit. In this case, no matter what you do you might not get a loan, or if you do, it might not be advisable.
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