Getting a Home Loan When You’re Self Employed
If you own and run your own business, you may be wondering – can I get a home loan if I’m self employed?
At North Brisbane Home Loans we recognise the impact that being self-employed can have on long-term financial decisions and we’re here to help.
We can offer you the best advice on what will work for you and ways to keep your finances in order so you can obtain a home loan as a self employed business owner.
How Can We Help Someone Get a Home Loan If They are Self Employed?
You may be asking why is it so difficult for people who are self – employed to get finance approved?
The facts are that 90% of all businesses that start – fold or are simply not trading in 5 years. So it is just a straight assessment of risk. If they are going to lend you $400,000 or more – you need to prove to them that you have the capacity to pay it back long term. So if you have 2 full financial years and you operate in profit, pay your taxes on time and your personal tax returns reflect this in your notice of assessment from the ATO – then you can qualify for a loan just like anyone else up to 95% LVR.
But if you have been trading for 1 year or less, then you will need to provide more deposit and also proof by way of BAS or bank statements or an accountant’s letter to verify your income flow. These lenders are normally not mainstream and the rates are normally higher to reflect that risk. However, they do serve a purpose for clients that need the funding sooner than waiting the 2 full years, who have a decent deposit and have cashflow to fund the repayments. Normally 1-5% per annum more expensive than the mainstream home loan rates.
What is Required to Secure a Home Loan?
To secure a home loan when you are self-employed, many lenders may require you to provide documentation or proof such as:
- Business Activity Statements (BAS).
- Proof of GST registration.
- Bank statements for business and personal accounts.
- Proof that you have been self-employed in the same industry for at least one-two years (depending on the lender).
- Proof of ABN registration.
- Business Financial Statements (Balance Sheets | Profit & Loss etc) plus ATO Income Tax returns.
- Personal Income Tax Returns and Notice of Assessments.
- Evidence of deposit or equity.
What Deposit is Needed for a Home Loan?
Every lender has different criteria, but generally, you will need a minimum of 5-20% of the property value saved as a deposit if you are self-employed. You will also need to pay lenders mortgage insurance if under a 20% deposit. The bigger the deposit the better the lender and rate normally.
Further Tips and Advice
- Ensure existing commitments – loans and payments are up to date and met on time. Also, make sure credit cards are under limits all the time and minimum payments are met.
- Keep your tax portal clean and on time as well especially when it comes to your BAS.
- Discuss with your accountant and also your broker prior to finalising your end of year income distribution as it could make a material difference to what you can borrow.
Can I Get A Home Loan If I am Self Employed?
North Brisbane Home Loans is Brisbane’s leading mortgage brokers with more than 90 years’ combined experience.
We offer expert advice on a huge range of services including First Home Loans, Purchasing Your Next Home, Refinancing or Home Loans for Self-Employed. Contact us today on 07 3889 9719 or enquire online today!