Soniez Group

Self Employed Home Loan

Home loan secrets for the self employed

How much can I borrow?

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Will I get approved?

How Long Do I Need To Be Self-employed To Qualify For A Home Loan?

To get a self employed home loan, most lenders require you to be self employed for at least two to three years, however some can consider people who have been self employed for only one year!

If you’ve been self-employed for one year or more, speak to us today on 1800 771 900 or fill in our free assessment form to find out how you can get approved for a mortgage.

What if I’ve been self-employed for less than a year?

If you’ve been self-employed for less than one year there aren’t many options. Most banks won’t lend to you because you don’t yet have tax returns to prove your income and because new businesses have more financial uncertainty.

One of our lenders can look at your income from your last job and take that as proof that you can afford the loan.

The reasoning behind this is that if you decided to close your business you could always return to working for someone else on a similar salary. On that basis we can help you borrow up to 80% of the property value.

What If I’ve Been elf-employed For One To Two Years?

One of our lenders can approve loans for people who have been self employed for between one and two years as long as they have been in the same line of work for some time and have at least one year’s financials for the new business.

A good example of someone we can help would be a plumber with his own business, who has been operating one year, who was previously employed as a plumber for five years.

If you’re concerned that your employment situation may make you ineligible for a home loan, please call us on 1800 771 900 or fill in our free assessment form. We specialise in helping self-employed people get home loan products with great rates!

What Mistakes Do Banks Often Make?

We often see mistakes in the way that the banks calculate the income for self-employed borrowers.

For complex loans, we make extensive notes, and if need be, call the assessor and walk them through the financials to ensure that they assess the loan correctly.

The most common mistakes we see are:

How Do Lenders Calculate My Income?

Most lenders believe that by looking at your past tax returns, they can predict how stable your business will be in the future.

Banks and non-bank lenders alike tend to be very wary if you have an income that has increased or decreased by a large amount in the last two years.

As you can imagine, this makes a big difference to your loan application! Importantly, every lender will interpret your tax returns in a different way and may look at your skills as an entrepreneur, your experience in the industry and the risk profile of your industry to determine how to assess your income.

Depending on your situation, we may pick and choose which information to provide to help prove the highest possible income. If you can provide them, then we may ask for Business Activity Statements (BAS), An Australian Taxation Office (ATO) tax portal printout or bank account statements for the last three to six months showing your turnover.

We specialise in finding the lender that will look at your documents most favourably!

Please contact us on 1800 771 900 or fill in our free assessment form and we can help you find the right lender who will assess your income in the best possible way while buying a home!

What If I Make My Own Income?

Under a new policy from one of our lenders, you may qualify for a loan based on the following:

What Do lenders think?

Lenders have the view that self employed borrowers represent a higher risk because their income isn’t as stable.

Some banks even view those in the construction industry less favourably then those from accounting firms. This is simply because banks have seen higher levels of default over the years from particular industries so tend to be more conservative when lending to them.

At one time, a leading mortgage insurer even refused to approve low doc loans for builders!

As you can see, the banks complete a more thorough assessment of applications from business owners.

Luckily we can help!

Unlike most major banks, we know that there are also hundreds of thousands of businesses Australia wide that have been trading profitably for years.

It just isn’t fair to paint them all with the same brush!

We know which lenders treat self-employed people more favourably. Contact us on 1800 771 900 or fill in our free assessment form for expert advice on your loan!

How Will Lenders View My Tax returns?

When a credit officer working for a bank receives your tax returns on his desk he’ll check to make sure they’re signed and certified and backed up by notices of assessment. This is a simple fraud check to make sure that these are the tax returns you lodged with the ATO.

Next, he’ll usually look at the last two year’s taxable incomes and add back any unusual expenses such as one-off losses.

Did you know some lenders will add back extra super contributions and even depreciation?

This is where the banks really show a large difference in the way they read your tax returns! 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 cash flow projections, depending on the nature of your business and risk of your application.

How Recent Are Your Tax Returns?

Every March or April, most lenders begin to ask for tax returns for the most recently completed financial year. Up until that point, you can provide the tax returns from the year before!For example, if you applied in January 2021, most lenders would require your tax returns for 2018 and 2019. However, in March 2021, most lenders would require 2019 and 2020 returns.

Of course, there are always exceptions! One of our lenders can accept older tax returns as an exception to their normal policy. This is useful for people who haven’t had a chance to lodge their most recent return.

One of our other lenders only requires one years’ tax returns. This is useful for people who have had a bad year the year before or who only recently started their business.

If you can’t provide BAS, we know lenders who don’t require it if you have recent tax returns. For example, if you manage to provide tax returns for the Fiscal Year 2020/21, you won’t need BAS. However, BAS requirements will still apply if tax returns for 2019 are the latest held.

What Is An “add back”?

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 that you’ve incurred that reduced your taxable income, however aren’t a “real” expense or ongoing commitment.

By adding back expenses you can increase your assessable income and your borrowing power

Some examples of add backs are:

Avoid Business Banking

If you’re borrowing in a company, trust or partnership, you may get referred to business banking. Avoid this at all costs!

If you have a residential property as security then why should you pay a higher rate and higher fees just because you’re borrowing in a company? Your loan may be a business loan, however, the risk to the lender isn’t any higher than for a standard mortgage!

Some of our lenders will approve company home loans and trust home loans at standard residential rates.
You may have to pay slightly higher fees so that the lender can draw up more extensive loan documents which encompass a personal guarantee from the directors.

For more information or to apply for a loan, please contact us today on 1800 771 900 or complete ourfree assessment form. We can help you get approval!

Apply For A Home Loan

If you’re self-employed and looking to get finance, please speak to us!

However, keep in mind that it’s best to apply for a home or investment loan when you feel your business is stable.This is something that both us and the bank can’t assess, you’d need to determine this for yourself.

Talk to us on 1800 771 900 or complete our free assessment form to obtain a quote from a lender that will best suit your situation.