Self-Employed Borrowers
Self-employed borrowers often encounter unique challenges when securing a home loan. Lenders often perceive self-employment as higher risk due to income stability concerns. However, we believe it's unfair to generalise all self-employed individuals. Our knowledgeable Mortgage Brokers are here to guide you through the process, ensuring you have the necessary documentation and access to suitable home loan products.
Simplify the home loan process
Navigating the maze of paperwork can be daunting, especially for self-employed individuals. Our team specialises in helping self-employed clients secure the best home loan deals by understanding and positioning your application in the strongest way possible. We believe that a self-employed person with a proven and profitable trading history shouldn't be penalised.
We offer tailored loan solutions, knowing which lenders treat self-employed people more favourably. From gathering the right documentation to finding the right home loan, we assist you at every stage of the application process. We work hard to provide sufficient proof of a profitable trading history to avoid the “low doc loan” pathway and secure better terms.
Required documentation
Applying for a home loan when you’re self-employed requires additional documentation compared to salaried individuals. Here’s what you might need:
Last two years of company tax returns
Last two years of personal tax returns
Profit and loss statements
Balance sheets
ABN and GST registration dates
Overcoming the challenges
Self-employed individuals often face challenges such as higher interest rates and stricter lending criteria. However, by demonstrating consistent income, business growth, and a solid trading history, you can improve your chances of loan approval. Our brokers will guide you through the process, ensuring you meet all necessary criteria.
Lenders view self-employed borrowers differently than salaried employees. If you work for yourself, your lender will consider both your personal and business financial positions. This means demonstrating stable income and profitability is crucial. We help you present your financials in the best possible light to increase your chances of approval.
To get a better idea of your borrowing power and likely repayments, try our Borrowing Power Calculator and Loan Repayment Calculator.
When applying for a home loan, self-employed individuals need to provide a comprehensive set of documents to prove their income and business stability. We help you gather and present the necessary paperwork, including:
Tax Returns: Provide the last two years of company and personal tax returns.
Financial Statements: Include profit and loss statements and balance sheets.
ABN and GST Registration: Show your business's registration dates to establish credibility.
Bank Statements: Submit business and personal bank statements to demonstrate cash flow.
In addition to the basic documentation, here are some extra steps and tips to enhance your application:
Consistent Income: Show a consistent income stream and business growth over the past two years.
Business Longevity: Demonstrate that your business has been operating profitably for a significant period.
Equity Utilisation: Leverage the equity in your existing properties to strengthen your borrowing capacity.
Alternative Documentation: For those with less than two years of tax returns, provide Business Activity Statements (BAS) or a letter from your accountant to validate income.
While low doc loans might seem like an easy solution for self-employed individuals, they often come with higher interest rates and stricter terms. We work diligently to help you provide full documentation, allowing you to access better loan products with more favourable conditions.
Expert home loan guidance
Are you self-employed and looking to borrow for your next home or investment property? Are you unsure of your borrowing capacity or concerned the bank will not understand your financial statements? We are experts in helping self-employed clients and business owners succeed in home lending and securing them the best home loan deal possible. We work diligently to accurately understand and position your application in the strongest way possible to make sure it gets approved by the bank.
With the right documentation and the right loan products, securing a home loan as a self-employed individual is possible. Want to know if you qualify for a professional home loan package as a self-employed professional? Contact My Finance Consultants today to find out the requirements and explore the options available from our expert Mortgage Brokers. We are here to help you secure the best financing solutions tailored to your unique needs.
Why choose My Finance Consultants?
We do all of the legwork
We compare hundreds of home loan options from a wide choice of lenders, including the big banks and specialist lenders. We handle every step, having a thorough process in place to qualify you with our lender panel to find the most suitable lending options for you. We organise all of the required paperwork, order lender valuations, liaise with your real estate agent and conveyancer for a smooth transition to settlement.
We provide a convenient service
Mortgage Brokers save you the time and hassle involved in applying for a home loan - from application through to settlement. We'll meet at a time and place that best suits you, to establish your needs and preferences. We then do all the research and running around to manage every step of the application process. This saves you shopping around - as we do it all on your behalf.
We provide professional advice
We are fully trained, and accredited with every lender we represent. We are full members of the Mortgage & Finance Association of Australia and we have many years of industry experience. We also have a number of consumer protection initiatives in place to protect you - our valued clients. As mortgage professionals, we seek to guide you through the lending process to help you make better financial decisions.
We help you select the right home loan
Our first priority is helping you select the home loan that’s right for you, now and into the future. Your Mortgage Broker will save you the time and hassle associated with shopping around for a home loan, they will also guide you through the home lending process to help you make better choices with your personal finances.
We will always try to save you money
We use comprehensive software which helps us pinpoint the most suitable and competitive home loan for you. Typically, our service can help cut the current interest rate you are paying as well as reduce your fees and monthly repayments. Using a Mortgage Broker is also a great way to figure out a strategy to maximise your borrowing power.
We don’t charge you a fee for our service
There is no charge to you for our services because the lender pays us a commission once your loan has settled. We do charge a commitment fee for home loan pre-approval applications, however we will refund this to you upon settlement of your home loan. We will always aim to provide a trusted, friendly and professional mortgage broking service.
Our clients have been saying some great things about us!
Whatever your goals, a competitive home loan will get you there faster!
Whether you're a first home buyer, upgrading to your next home, getting into property investment, or wanting to refinance and pay off your existing home loan sooner, we can help you make the right decisions and stay on top - whatever your home loan needs.
We'll compare more than 40 leading banks and lenders, as well as hundreds of home loan options to find one that's right for you. No matter what kind of mortgage you're interested in, you'll enjoy expert home buying and lending advice from a Mortgage Broker you can trust.
Our industry knowledge and sophisticated mortgage software allows us to assess and compare the hundreds of home loans that are available in the marketplace, we will calculate your borrowing capacity and identify which lenders you will qualify with.
If you're ready to start your home loan journey, give our friendly team a call on 1300 381 955 or visit the Book Appointment section on our website.
FAQs
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We are experts in assisting self-employed business owners with home lending. Here’s how we help:
- We deeply understand how to read financial statements and interpret self-employed income.
- We know how to look for and explain income add-backs and one-off expenses.
- We know how to present your income to the bank so that you can borrow every dollar that you are entitled to.
- We intimately know each bank’s self-employed income policies and when to apply them.
- We work closely with your accountant to understand your financials and present your strongest application to the bank.
- We manage the process for you to save you time and allow you to focus on your business.
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The bank would ideally like you to have run your business for 2 years, with 2 years of ABN and GST registration. There are exceptions where you are very experienced in your industry and can demonstrate that your income will grow or remain consistent upon starting your own business.
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Unlike a salary, the income for self-employed clients is harder to predict and varies from year to year. Most banks will aim to understand the consistency of this income by requesting your completed financials for the last 2 years. Completed financials mean those which have been lodged with the ATO and your Notice of Assessment has been issued. Some lenders will only require or use your latest year’s income to determine loan servicing.
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The income verification documents for self-employed clients mainly include:
- Last 2 years of Company/Trust Tax Returns & Financial Reports
- Last 2 years of Individual Tax Returns & Notice of Assessments
The remaining documents will be the same as any other borrower, whether for an owner-occupied property or investment.
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The principles of determining borrowing capacity are the same as for any type of client. It involves:
1. Understanding and determining your income.
2. Subtracting your living expenses and the repayments on your liabilities to derive your net income that can be used to repay a loan.
The hard work in a self-employed scenario goes into understanding your income and picking the bank that will view it the most favourably.
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Banks can treat your income in several ways:
- They will use your latest year’s income.
- They will average your last 2 years’ income.
- They will take your lowest year’s income if your latest year is lower than the previous year.
- They will take 120% of the previous year’s income if your latest year is higher than the previous year.
The income calculation methodology that applies will depend on the lender that is selected.
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Yes, some banks will let you add the profits of the company to your own salary or director's fees if you own 100% or have a substantial shareholding in your business. If you have a minor shareholding, or the bank's policies disallow, only the income you draw from the company that ends up in your personal tax return will be accepted for servicing.
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Yes, loans within your business can reduce your borrowing capacity. Some lenders factor in the repayments on your business loans into your serviceability, while others may ignore them.
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No, we have expertise in interpreting income from all types of entities. The skill here is understanding the flow of income to understand your true borrowing capacity.
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When there is a split shareholding, some lenders will apportion your share of the company’s profits to your servicing, in addition to any PAYG income drawn. Other lenders will only accept for servicing what you actually draw from the company in the form of salary, directors fees, or dividends.
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No, for normal full-doc lending, there is no difference in the interest rate if you are approved for your loan. The rates will be the same as if you were a PAYG salaried employee.
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If your financials are not up to date, you will need to urgently advise your accountant to complete them to achieve formal loan approval. If you cannot finalise your latest year's financials, you may have to consider a specialist loan.
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If you have only been operating and working for yourself for a year or so, but have been working in the industry for many years, you could try applying for an alternative document loan. Special consideration may be taken for being in the same line of work for many years, even if your books are relatively limited.
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A low documentation ‘low doc’ loan is designed for borrowers who cannot provide all the normal paperwork required for a standard home loan application, such as lodged tax returns or financial statements. A low doc loan includes an element of self-verification to confirm a client's income details, often supplemented by BAS, bank statements, or an accountant's letter.
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Self-employed home loans come with their own set of restrictions and conditions. These include:
- Income declaration requirements
- Assets and equity requirements
- Credit history and cash flow considerations
- Potentially higher interest rates for low doc options
- Lower Loan to Value Ratios (LVR) for low doc loans.
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If you have less than 2 years of accounts and tax returns, you may still qualify for a self-employed home loan. Speak to a Mortgage Broker to discuss your options.
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Most lenders begin asking for the most recently completed financial year’s tax returns every March or April.
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An "add back" is an expense that is added back to your income because it is not a day-to-day expense. Examples include depreciation, additional super contributions, net profit before tax, and one-off expenses.