Director Loan Account
Servicing Capacity Simulator
See how different Australian lenders assess a debit director loan balance — either counted as an ongoing personal commitment or excluded via subordination — before you apply.
If you are a company director, money moving between you and your private company is typically tracked on the balance sheet as a director loan account. When applying for a personal home loan, lenders inspect these balances closely. A debit balance (where you owe the company) can be treated as a personal commitment needing repayment, which can drag on assessed capacity. Alternatively, some commercial-side lenders may accept a subordination deed or letter confirming the company will not call for ongoing repayment. Model both scenarios below to evaluate the indicative servicing differences.
✅ Current as of 16 June 2026 · estimate only · not a credit quote
Your Numbers
Assessed Servicing Impact
Some lenders may take this view where the company confirms the funds aren’t called for ongoing repayment (e.g. a subordination letter or deed) — lender-dependent, not a guarantee.
Walkthrough video — coming soon
A short walkthrough showing how lenders evaluate company balance sheets and director loan accounts will live here.
How One Balance-Sheet Line Can Move Your Borrowing Power
For company directors and self-employed business owners, your accountant likely tracks funds shifting between you and your private company via a director loan account. When you apply for a residential home loan, credit underwriters do not treat this line casually.
The Policy Divergence: Repayment vs. Subordination
Different Australian lenders apply differing credit guidelines to a debit director loan balance:
- Assessed Commitments: Standard retail credit policies often add a simulated monthly payment to your application. This treats the balance you owe your company as a personal debt needing rapid amortization, reducing your assessed capacity.
- Subordination Letters or Deeds: Some lenders (particularly on the commercial side or in specialist business divisions) will accept formal confirmation that the company does not require active repayment. With a subordination agreement, the lender may exclude the commitment entirely.
- Accountant Routing: Credit guidelines operate separately from the tax laws governing private companies. Compliance under tax rules (such as Division 7A loan agreements, terms, and minimum yearly repayments) is strictly a matter for your accountant, not credit serviceability.
Structuring Before Strategy
This tool illustrates how credit policies treat a single director loan balance. To see how your company structure, trust distributions, and self-employed income interact across all five credit assessment pillars, you must examine the whole picture.
Frequently Asked Questions
Why does a director loan account debit balance affect borrowing capacity?
A debit balance in a director loan account means you owe money to your company. When applying for a personal home loan, some lenders view this debit balance as a personal liability similar to a personal loan. They simulate an ongoing monthly repayment over a standard term (often 7 years) and deduct this from your assessed servicing income, which can significantly reduce your borrowing capacity.
How do lenders calculate the simulated monthly commitment?
Lenders that count a director loan balance as a commitment typically calculate a simulated monthly payment using an illustrative amortization schedule. A common policy models the balance as a personal loan with an illustrative interest rate (such as 8.5% p.a.) amortized over a 7-year term (84 months). This simulated commitment is applied even if the company has no immediate intention of calling the loan.
Can I avoid having my director loan balance counted as a commitment?
Yes, under certain lender policies. If your company formally confirms that the funds are not called for ongoing repayment—often documented via a subordination letter or deed—some lenders (especially on the commercial or specialized underwriting side) may agree not to count the balance as an ongoing commitment. This treatment is highly lender-dependent and is not a guarantee.
Is a director loan account servicing assessment the same as Division 7A tax compliance?
No. The lender’s servicing assessment is strictly a credit policy calculation to test your capacity to repay a mortgage. Division 7A is a tax law enforced by the ATO to ensure private company loans to shareholders are not used as tax-free distributions. While you may have a Division 7A loan agreement in place, how a lender treats that balance for serviceability is a credit policy matter, while the tax compliance is a matter for your accountant.
Built by Virginia Graham Riches, founder of Model Mortgages and host of Property & Mortgage Insights Australia, supported by a specialist team of five mortgage brokers through Finance on the Coast. We align business balance sheets to the underwriting criteria that recognize the substance of your structure.
See your full picture at Structur →What it estimates: how a director loan balance might affect assessed borrowing capacity under two illustrative lender treatments — counted vs not counted as an ongoing commitment.
Key assumptions (illustrative): income recognised ~72%; living costs $24,000/yr; assessment rate 9.5% (6.5% + 3.0% APRA buffer) over 30 years; the commitment modelled at ~8.5% over 7 years. Sample figures only.
Current rules: treatment of director loan accounts varies by lender; a subordination letter/deed is lender-dependent and not a guarantee. The tax treatment of director loans, including Division 7A, is a matter for your accountant, not this tool.
Sources: lender credit policy (varies by lender); ATO guidance on Division 7A / private-company loans (tax treatment — confirm with your accountant).
Indicative estimate only — not a quote, credit assessment, approval, or personal credit, financial or tax advice, and not an offer of finance under the NCCP Act 2009 (Cth). Model Mortgages Pty Ltd, Australian Credit Licence 387460 (ABN 82 108 681 063).