Applying for a home loan can be tricky if you’re self-employed. But being your own boss should not hold you back from owning your first home.
At Mortgage Pros, we have helped thousands of Australian entrepreneurs land their best home loan deals. Our senior mortgage specialists can take you through bespoke home loan solutions so you can navigate homeownership smoothly.
How much can I apply for?
Self-employed individuals can borrow up to:
- 95% of the property value with substantial income verification and tax returns for the last two years.
- 80% – 90% of the property value for self-employed borrowers applying under a low-doc home loan.
- Up to 80% of the property value if you’re self-employed for less than a year.
Most lenders in our panel will require at least two years of tax returns and financial statements. Some lenders may consider a one-year tax return report or other reliable proof of income.
Is there a minimum self-employment period required to qualify for a home loan?
Most lenders will need you to be self-employed for over 2 years to qualify. Depending on your financial situation, some lenders will consider at least one year of self-employment!
If you’ve been running your business for less than one year or within 1 to 2 years, don’t hesitate to call us at 1300 030 388. Our panel includes lenders who consider shorter self-employment experiences with reliable income records.
How do lenders evaluate my income?
Lenders look into your previous tax returns to assess and forecast your business’s stability throughout your loan term. Moreover, banks and non-bank lenders are more careful with applicants with decreased income in the last two years.
Here are common ways lenders use your financial statements to evaluate your income:
- Lenders may refer to your lowest income in 2 years as your financial benchmark.
- Some banks may look into your latest income to describe your borrowing power.
- Others may average both years to estimate your income
- Some lenders may or may not add back paper expenses indicated in your tax returns
- A few others also accept payslips for the last six months and an official letter from your accountant instead of financial statements.
In other words, different lenders interpret tax returns differently. Some banks may see you as a strong borrower, while others do not.
Your industry experience, risk profile, and tax returns impact your home loan application. With the help of our mortgage experts, we may choose which financial information to submit so you can present the highest possible income.
Our mortgage specialists may request your tax returns or business activity statements (BAS) showing recent turnovers.
At Mortgage Pros, we’ll help you look your best in front of lenders with the most favourable application for approval.
Discuss your financial situation with us, and we’ll take you through bespoke home loan solutions to land you your dream home.
What do lenders look for with self-employed applications?
Self-employed borrowers may need to consider the following when applying for a home loan:
- All income you made as self-salary is considered pay-as-you-go (PAYG)
- Your business should have been operating for at least two years.
- If you make your own income, most lenders won’t require NOAs, financials, and tax returns.
- Bank statements for the past 6 months is required.
How are my tax returns evaluated?
When a banking and credit officer receives your tax returns for evaluation, they’ll conduct a basic fraud check by ensuring your documents are signed, certified, and backed by assessment notices.
Then they will look into your recent taxable incomes and may add back expenses such as:
- One-off expenses (may require an accountant’s letter to confirm)
- Asset write-offs
- Company car expenses
- Trust distributions
- Net profit before tax (NBPT)
Adding back expenses can significantly increase your income for assessment and boost your borrowing power!
Speak with our mortgage brokers today to know more about leveraging your expenses in your self-employed home loan application.
Do I need to provide the latest tax returns?
When applying in March or April, lenders will ask for your tax returns for the recently completed financial year. Until that period, you can submit tax returns from the year prior.
If you applied for a self-employed home loan in January 2023, lenders typically require tax returns for 2020 and 2021. But for March 2023, lenders will ask for your 2021 and 2022 tax returns because the latest financial year was just completed.
On the other hand, lenders evaluate case-to-case, and some may accept older tax returns as an exception. This is helpful for self-employed applicants who went through a bad year or who only recently ventured into business.
Moreover, lenders may exempt you from submitting your recent business activity statement if you have the latest tax returns. Otherwise, BAS requirements will still apply–but our mortgage brokers will guide you all throughout the application.
How do lenders see self-employed borrowers?
For most lenders, self-employed borrowers pose a higher risk since their income won’t be as stable as when employed. Certain industries, like construction, even represent more risk than others, such as accounting or law firms.
That’s because, historically, banks have seen more default rates in these industries over the years. So now, they tend to be more careful and conservative with rates when lending to them.
Fortunately, we’ve got you covered!
We offer a full range of lenders offering home loans for self-employed individuals and will take you through better offers and rates from less meticulous lenders than most major banks.
Shopping for home loans is never an easy task. But don’t simply accept the first bank that approves your application. In one sitting, we’ll take you through all our available solutions so you can compare and contrast your options and make informed decisions.
Stay away from business banking!
If you’re applying for a partnership, company, or trust loan, they may refer you to business banking. We recommend avoiding this at all times to prevent costing you more in the long run!
If you declare a residential property as loan security, you should not pay a higher rate with more fees just for borrowing from a company. While the nature of business loans is distinct from a home loan, the risks for your lender remain the same as a standard mortgage!
Discuss your financial goals with us at Mortgage Pros, and we’ll take you through lenders offering company and trust home loans under standard mortgage rates!
Get the best Self-Employed Home Loan with Mortgage Pros
Applying for the right home loan if you’re self-employed is all about preparing the right documentation and making informed decisions along the way.
A mortgage specialist who knows self-employed home loans should know the criteria you need to meet and can help you save time and money from pesky banks and sketchy loan policies.
At Mortgage Pros, we’re real people with real solutions.
Speak to one of our senior mortgage brokers about your financial situation, and let us discuss how you can make the most of your application and land your dream home in no time!
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