Can I get a loan if I work for my family?
Family-run companies make up over 80% of Australian small businesses. Many family owned and run businesses have simple processes and no formal accounting systems.
This may not be a problem when running the business, however, when it comes to applying for a home loan it can cause problems!
If you work for a family member then banks require additional documents to prove your income. Often these are documents which people can’t provide, so they are unable to get a mortgage.
How can I prove my income?
Most lenders require you to provide a Notice of Assessment to prove your income, however some lenders can accept other evidence of your income.
If you can provide one of the following documents then we may be able to assist you:
- Payslips: These should be computer generated, not handwritten.
- Bank statements: These must show your salary being deposited into your account. You must provide between one and six months statements depending on the lender.
- Group certificate / PAYG payment summary: This shows your last year’s income and so may not be current. This must not be handwritten.
- Tax returns and Notice of Assessment (NOA): This is not required by some of our lenders however most banks require these for all customers who work for their family.
- Employment letter: This is a letter confirming your income, length of time in your job and appointment date (not accepted by most lenders).
The key to getting approved is finding the right lender that will accept the documents that you can provide!
We have a lender on our panel that will accept 100% of your full-time or part-time base salary. You will need to provide the last two salary credits, supported by either two payslips or an employment letter confirming your role, tenure, and salary.
How much of my property value can I borrow?
The total amount that you can borrow usually depends on how much evidence you can provide. Basically, the better the supporting documents that you can provide, the higher the percentage of the property value (LVR) that you can borrow.
If you can provide the required documents as evidence of your income, then you can apply for a 90% home loan or even a 95% home loan in some cases.
Effectively, if you can’t provide enough evidence of your income then our banks may limit your loan to 80% of the property value to reduce their risk.
Do you think that you don’t have enough documents to support your application? Call us on 1300 889 743 or send us a free online enquiry today and one of our expert brokers will let you know how much you can borrow.
What is the maximum that I can borrow?
The maximum you can borrow is 100%, if your family acts as a guarantor and provides their property as additional security for your home loan application.
A guarantor home loan will also helps you to avoid paying an LMI premium and won’t require you to put up a deposit!
Why are people employed by their family less favoured?
Usually, people working in their family businesses are employed by their parents, a sibling or a grandparent. Therefore banks are not sure how reliable an employment letter, payslips or other documents are to prove their income.
They manage their risk by asking for additional documents that are not required by people who don’t work for a relative’s business.
As part of their normal employment verification processes many banks complete an ASIC search on the employer to confirm if the directors and shareholders of the business are related to the borrower.
Why do banks ask for a Notice of Assessment?
Some lenders will only approve a loan if a Notice of Assessment (NOA) is provided.
A Notice of Assessment is an official document prepared by the Australian Taxation Office (ATO) which is a statement of the tax that you have paid in the last financial year and the tax that you owe the government or the tax refund that they owe you. It is mailed to you around two weeks after you lodge your tax returns.
Since it shows your taxable income for the last financial year and is also an official document from the government, lenders have definite proof of your income and will consider your mortgage application.
The problem that many people have is that their income has changed since the last financial year so they cannot use this method to prove their current income. If the borrower did not work for the same employer, the bank may decline their loan due to not meeting their income verification requirements.
We know which lenders require which documents and are more likely to approve your home loan application. Please enquire online or call us on 1300 889 743 to speak to one of our expert mortgage brokers.
Are handwritten payslips okay?
Handwritten payslips are NOT accepted by banks and other non-bank lenders.
Payslips are only accepted by banks if:
- They are computer-generated.
- They contain your YTD income.
- They pass the bank’s verification process.
Payslips created in MS Word or MS Excel aren’t considered to be computer generated!
Payslips will only be accepted if generated using a payroll/accounting system such as MYOB, XERO or Quickbooks (see example).
Apply for a home loan today!
Applying for a mortgage while working in a family business can be complicated. Our expert brokers have helped others in the same position to get approved, so why not you?
Enquire online or call us on 1300 889 743 today to discuss your situation in more detail with one of our brokers who will help you get approved!