Should I buy a house or a business first?
The two purchases compete for the same savings, credit and borrowing capacity, so the order changes what each lender sees. Neither order is right for everyone. Map your cash, income and personal guarantees across both, then ask a mortgage lender, a business lender and your accountant how each sequence would look to them.
Many people considering a business purchase also want a home, and both ask for a large down payment from the same pool of savings. Both lenders will look at your credit history, your debts and your income. The order matters because the first purchase changes what the second lender sees. This page does not tell you which to do first. It sets out what to weigh and who to ask.
Both purchases draw on the same cash
A down payment on a home and an equity contribution to a business come out of one account. Spend it on one and the other waits, or needs a different source. Keep some cash aside as well. A new owner may go without a regular pay cheque for a while, and a new homeowner has costs that are easy to underestimate. Write down what each purchase needs in cash, then see what is left.
What each lender looks at
A mortgage lender usually asks how steady your income is and how much debt you already carry. If you have just bought a business, your income history may be short or may change shape, and that can affect how a mortgage application reads. A business lender, in turn, will ask about your personal finances and may want to see what you already owe. Our page on how a business loan affects a personal mortgage goes into the first part.
Personal guarantees reach your household
Lenders often ask the buyer of a small business to guarantee the loan personally. That can put personal assets, including a home, behind the business debt. Read what you are being asked to sign, and ask how a guarantee could interact with a mortgage. Your lawyer can explain the document, and your accountant can help you see the effect on your wider finances.
Questions to settle before you choose
- How much cash does each purchase need, and what reserve do you want to keep?
- How would each lender treat the other debt once it is in place?
- Would the business loan require a personal guarantee, and over what assets?
- What happens to your household budget if the business pays you less than planned?
Related reading
15 pages on the same subject, grouped by topic.
Financing
- Expert answerWhat do lenders want to see from a business buyer?
- Expert answerHow do I get a loan to buy a business?
- GuideHow to finance a business acquisition in Canada
- Expert answerCan I blend bank, vendor and buyer financing to buy a business?
- ComparisonBank loan vs vendor financing
- Expert answerWhat happens if I default on an acquisition loan?
- Expert answerWhat does a typical Canadian deal structure look like?
Buying
- GuideHow much money do you need to buy a business in Canada?
- Expert answerHow many businesses should I look at before buying?
- Expert answerWhat should I do in the first week after buying a business?
- Expert answerCan I buy a café with no experience?
- Expert answerShould I buy an existing café or open a new one?
- Expert answerHow do I find a hostel for sale in Canada?
- Expert answerWhat should I check before buying a hostel?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Financial Consumer Agency of CanadaGovernmentChoosing a mortgage that is right for you
- 02Business Development Bank of CanadaGovernment5 solutions to get a business loan without collateral
- 03Business Development Bank of CanadaGovernmentHow to finance a business acquisition
- 04Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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