Home Loan Options for the Self-Employed

Self-employment encompasses not only business owners, but also freelancers, consultants, contactors, gig workers, and many more. It can provide a sense of freedom and flexibility, but it can be problematic when securing a home loan. This is because banks and other lenders tend to be more stringent with their lending policies when it comes to those who work outside of the traditional PAYG system. 

The good news is there are still options available for the self-employed who are looking to purchase or refinance a property. 

All lenders have guidelines regarding borrowing capacity which are based on ability to make repayments, loan-to-value ratios, and debt-to-income ratios. These guidelines are to mitigate their risk and vary by lender and by the type of property purchase – owner-occupied, investment, or commercial. 

Major banks and lenders 

Major banks and lenders do offer home loan options for the self-employed. You will likely need to provide, at least, your most recent personal tax return and Notice of Assessment, plus a full set of business financials (including the profit and loss statement) as well as evidence of your assets and liabilities. You may also be required to include a letter from your accountant advising your business has sufficient profits to meet its financial commitments. 

Alt-doc/low doc loans 

These loans are an option for self-employed people who may not have traditional income sources or up-to-date financials available. Most lenders will require at least a deposit of 20% as well as confirmation of your ABN and GST registration, and documentation to verify your income, such as BAS and bank statements, personal tax returns and/or a letter from your accountant. 

These loans can be more expensive than a traditional loan so it is important you take into account the additional fees and rates which may be charged. 

Specialist lenders 

There are a number of specialist lenders (finance firms and investors) who offer home loans for self-employed people, and these may have fewer restrictions when assessing applications, for example, they may accept rental income as well as regular wage/salary. 

However, it is important to remember these lenders often can charge a high rate of interest with no redraw or offset, so it is important to compare the costs as well as any other restrictions in place. 

Home loan brokers 

Self-employment should not be a barrier to homeownership, but you may need the assistance of an experienced finance broker to help you find the right home loan solution. Each lender has their own guidelines and policies which can vary considerably. For example: 

  • How they factor in non-recurring and non-cash income and expenses 
  • The way that they analyse business debt  
  • How they attribute profit – both distributed and non-distributed, and which year, or years, they factor in when assessing the loan application.  

All of these elements change the borrowing capacity for the lender. 

Brokers understand the specific requirements of particular lenders and specialise in finding suitable loans for individual circumstances. They can save you time and stress by dealing with the lenders on your behalf, as well as helping you compare different loan products to ensure you get a rate and terms that suit your budget.  

When it comes to home loans, with the right advice and assistance, you are more likely to find an option that suits your individual needs – giving you access to the property market and allowing you to work towards achieving your financial goals. At Finance Advisory Co our client-focused ethos means we will always value your individual needs and work with you to provide the most suitable outcome. 

Speak to us today