Home Loans For Self-Employed Borrowers

To improve your chances of getting approved as a self-employed borrower:

• Maintain organised and updated financial records, including invoices, activity statements, and bank statements, to demonstrate consistent income to lenders.
• Provide at least two years of business financials, tax returns, and profit-and-loss statements to prove your income claims.
• Pay credit-card bills and loans on time to maintain a good credit score and lower existing debts to improve your Debt-To-Income (DTI) ratio.
• Track monthly cashflow to identify trends and save regularly for taxes and GST to show financial responsibility.
• Pay ATO debts on time.
• Carefully manage stock levels to avoid cashflow strain and review practices to order only what’s necessary.
• Discuss home purchase plans with your accountant to optimise finances and ensure records are mortgage-ready.
• Use separate bank accounts and financial records for personal and business transactions to simplify tracking and reporting.

Refinancing a home loan can provide benefits for self-employed individuals such as lower interest rates, improved loan terms, debt consolidation and access to home equity. To ensure a smooth refinance process, you can:

• Prepare detailed financial records, including at least two years of tax returns, business financial statements and BAS statements.
• Highlight business growth and recurring income contracts to determine stability.
• Build equity by making additional loan repayments or investing in home-improvement projects.

At Home Loan Experts, we can compare options from multiple lenders and identify the ones that can help you refinance your home loan. Call us on 1300 889 743 or enquire online now.

If you make your own income, you can still qualify for a self-employed home loan.

With some lenders, you may qualify for a loan based on the following:

• Provide two payslips OR six months’ salary credits plus an accountant’s letter as a substitute.
• All self-salaried income is treated as PAYG.
• Business should be operating for over two years and salary paid for at least six months.
• Does not require any NoAs, tax returns or financials.

The types of home loans available for self-employed individuals in Australia are:

• Full-doc loans: These are preferred if you can provide at least two years’ tax returns and NoAs.
• Low-doc loans: These are preferred if you can’t provide at least two years’ tax returns. You might need to save a higher deposit.
• Guarantor home loans: If you want to borrow more than 100% of the property value, a guarantor home loan is a good option.

As a self-employed borrower, you don’t always need to pay more on your home loan. If you can provide proof of your income and a lender is happy you can afford the repayments, you should qualify for the same interest rates as someone who is in a permanent, full-time role. The interest you pay on your home loan will also depend on other factors, such as your deposit amount or credit rating.

Your taxable income alone isn’t the same as the actual income that you can use to pay your commitments, including the repayments for the new mortgage. So lenders add back any expenses you’ve incurred that reduced your taxable income but aren’t a ‘real’ expense or ongoing commitment. Adding back expenses can increase your assessable income and your borrowing power.

• Depreciation
• Asset write-offs
• Additional superannuation
• Net Profit Before Tax (NPBT)
• One-off expenses
• Interest expenses
• Rental property expenses
• Company car
• Trust distributions

As you can see, this can get quite complicated. As a result, many bank employees make mistakes when assessing your income.

Lenders view tax returns as a crucial component in evaluating the financial health and stability of self-employed customers. The way your tax returns are assessed, however, can differ from one credit officer to the next. While one might just make sure they’re signed and certified and backed by notices, another might add back extra super contributions and even depreciation. Banks will also have different documentation requirements depending on if you’re a company, trust partnership or sole trader. They may ask for interim financials or cashflow projections, depending on the nature of your business and risk of your application.