Self-employed home loan
Do I qualify for a self-employed home loan?
To obtain a self-employed home loan, most banks typically require a minimum of two to three years of self-employment history and require two years of tax returns and financial statements. However, some borrowers may be accepted with just 6 months of self-employment! We have lenders that will accept one year of tax returns or alternative methods to verify your income.
If you've been self-employed for 6 months or more, please call us at 1300 965 688 or fill out our free assessment form to learn how to get loan approval.
How much can I borrow?
In general, self-employed borrowers can borrow between 80% to 95% of the property's value, depending on whether the borrower provides one or two years of tax returns or as a low-doc loan with minimal or no income verification.
How do lenders view self-employed borrowers?
Lenders typically consider self-employed borrowers to carry higher risk due to the potential variability in their income.
For instance, lenders may assess borrowers in the construction industry differently from those in legal practices. This distinction is often based on historical data indicating higher default rates in specific industries, leading to a more cautious approach when extending loans to these sectors.
To mitigate risk, banks conduct more detailed evaluations of business owners compared to those with stable salaries.
Unlike most major banks, we recognize that countless businesses across Australia have been profitable for many years. Treating them the same way as others would be unfair! We know which lenders treat self-employed people more favorably. Please call us at 1300 965 688 or fill out our free assessment form to receive expert advice on loans!
What if I've Been Self-Employed for Less Than Two Years?
One of our lending partners can approve loans for individuals who have been self-employed for a minimum of 18 months and can provide at least one year's financials for their new business.
If you've been self-employed for less than 18 months, your options are limited. Most traditional banks are hesitant to offer loans in such cases because you may not have the necessary tax returns to validate your income, and new businesses often come with greater financial uncertainty.
Fortunately, one of our lending partners can consider your previous job's income if it's within the same industry as your current self-employed business. They can use this as evidence that you have the means to handle the loan. A prime example of someone we can assist is a GP who owns his own business, has been in operation for one year, and previously worked as a GP for other clinics for three years.
If you're worried that your employment situation might affect your eligibility for a home loan, please don't hesitate to contact us at 1300 965 688 or complete our free assessment form.
What is a low doc loan?
A low doc (low documentation) home loan is a type of home loan that can be approved without the requirement for standard income verification.
This typically means you sign an income declaration and provide evidence, usually in the form of BAS (Business Activity Statements), business account bank statements, or an accountant's statement, to support the declared income. Your lender will accept these documents as proof of your income.
Case Study
David wanted to get cash out through refinancing and use it as a deposit to purchase an investment property.
He is a self-employed contractor but has not yet lodged a full tax return.
Loan Amount: $500,000 (refinancing) + $350,000 (extracting new funds)
Loan-to-Value Ratio: 80%
Annual Income: $220,000
Solution: A low doc loan was the solution, considering the substantial cash outs.
How do lenders assess my income if my income is not stable?
If your income has experienced significant fluctuations in the past two years, whether increasing or decreasing, traditional banks and non-bank lenders tend to act differently.
Some lenders may rely on the lowest income data from the last two years. Others may focus on the income reported in your most recent year's tax return. There are also those who opt for an average of your income over the past two years or consider 120% of the lowest year's income as a benchmark. Additionally, they may or may not add back some of the expenses listed on your tax return.
As you can imagine, this can have a substantial difference on your loan application! Depending on your specific circumstances, we will determine which information to provide to best support your income. We specialize in finding the lender that will look at your documents most favorably!
What if I pay myself a salary?
Under the updated policy of one of our lending partners, you could qualify for a loan under the following conditions:
You'll be required to provide either two payslips or three months of salary credit bank statements, accompanied by an accountant's letter.
In the case, all self-salaried income is treated as PAYG. You won't need to submit any Notice of Assessments (NOAs), tax returns, or financial reports.
Please be aware your business should have been operational for a minimum of two years, and salary paid for at least 6 months..
What Mistakes Do lenders Often Make?
We frequently come across errors in the way banks calculate the income of self employed borrowers.
For complex loans, we take thorough notes, draw the family trees and, communicate with assessors to ensure they assess the loan properly.
The most common problem is a lack of understanding. Complex trust structures involving multiple companies and trusts are typically handled by bank staff who may lack experience in understanding your income situation. In such cases, we often engage with bank managers and request that your loan be assigned to an experienced assessor capable of handling complex applications. We also talk to your accountant, financial adviser and subsequently communicate with the assessor to ensure they truly understand your situation.
Need Expert Advice? Contact Loanbox!
Please feel free to call us at 1300 965 688 or fill out our free assessment form. we can help you find the right lender who will understand your complex company structure in the best possible way!