So you are Self-Employed and you want to borrow money to buy a home or invest in property?
The truth is that property loans for self employed people are more onerous than for employees. There is simply more (mostly financial) information that you will need to provide to your mortgage broker or lender. Banks view self-employed people differently when it comes to home loans, and they also look at the financial position of the business as well as the individual’s personal finances.
If you are self-employed and looking to apply for a home loan, there are a few things you can do to make the home loan process smoother.
- Reach out to a mortgage broker for a pre-approval for your self employed home loan.
- Engage with your Accountant to ensure accurate and up-to-date financial information is ready for the mortgage broker.
What information will you need?
The first step is to gather all the necessary information that the bank will require to assess you for a self employed home loan. This includes providing information about your business separately from your personal finance information.
On the right are some of the key pieces of information that banks typically require from self-employed borrowers when they are assessing a home loan for self employed. It is best to pull this information together with your business accountant to provide to your mortgage broker to review prior to sending to a bank.
What to do next?
Once you have gathered all the necessary information, you can begin the application process by contacting a mortgage broker or you can go direct to a bank. Keep in mind that banks will assess your self employed home loan application based on their criteria for risk and affordability. Having strong positive cash flow in your business will help with your home loan for self employed.
As a self-employed borrower, you may need to provide more information than someone who is employed by a company. This is because banks want to ensure that you have a stable income stream and are able to service the loan repayments over the long term.
One way to increase your chances of being approved for a home loan is to work with a mortgage broker. A mortgage broker will be able to guide you through everything you need to collect and be able to present the information to the bank in the best possible way help you get a home loan for self employed people. They can help you find a lender who is more likely to approve your application and may be able to negotiate better terms and interest rates.
In summary
obtaining a home loan as a self-employed borrower requires more information than for those who are employed by a company. It is important to gather all the necessary information and provide it to your mortgage broker, ensuring both business information and personal finance information is complete.
Working with a mortgage broker can also increase your chances of being approved for a self employed home loan. With some effort and patience, you can achieve your dream of owning a home as a self-employed business owner
Collect this information with your Accountant BEFORE meeting with a mortgage broker or lender:
Self-employed Business Information:
- Financial statements for the business for the past 2-3 years, including profit and loss statements and balance sheets,
- Business tax returns for the same period
- Last financial year BAS returns,
- Details about the nature of the business, including its structure (e.g. sole trader, partnership, trust or company),
- Bank statements for your business for that period,
- Information about any other loans or debts the business has including credit cards, assets on hire purchase or lease.
Self employed Personal Information:
- Personal tax returns for the past 2-3 years,
- Bank statements for all accounts (business and personal),
- Proof of income, including any dividends or other income streams,
- Information about any other loans or debts you have including credit cards, car loans or personal loans.