Getting approved for a home loan when you are self employed can be much more involved than if you were an employee. Lenders require different documentation and more specialist knowledge is required to prepare and package your application correctly.
Simplifi Lending are specialists in self employed applicants- let our expert mortgage brokers manage your application and save you time and stress. Read on to learn more about the requirements for self employed home loans.
When applying for a home loan as a self employed borrower, it is critical that your application is managed by an expert with the knowledge to interpret and present your application in the correct way.
Some examples of required expertise include knowledge of:
We are familiar with the requirements that the lenders on our panel of over 40 lenders have for self employed applicants. Don’t risk getting your application declined- let our expert mortgage broker manage your application for you.
There are several different types of self employed borrowers , with lenders having different document and validation requirements depending on which structure is used. The majority of self employed borrowers will fall into one of the below categories:
A sole trader is typically a sole operator who run their own business, although sub contracting is possible under this structure. Income earned by sole traders is included in their personal income tax returns each year and financial statements may or may not be available. If you’re a sole trader looking for more information, check out our page on home loans for sole traders.
A partnership is a business structure which is made up or 2 or more people who own and run the business together. Management and liability for the business and its performance is generally split between the parties. A partnership has its own separate ABN and TFN and is one of the less common self-employed setups.
A company is a very common option for people who are self employed. It is a separate legal entity with its own ABN and TFN. The owners are setup as shareholders and often directors and income is paid to them in the form of a wage from the company or through director drawings. Even if you draw a wage from your company, in most cases lenders will still treat you as self-employed and validate your taxable income from tax returns and financial statements, not from your payslips.
Another common type of self employed setup is a trust structure. Trusts are typically setup as either a discretionary trust or a unit trust and control of the trust is delegated to a trustee. The trustee can either be individuals or a company setup for this purpose. If the trustee is a company, the individuals will generally be the shareholders and directors of this company.
Income from a discretionary trust is distributed to the trust beneficiaries each financial year according to directions from the trustee (i.e. at their discretion), whereas income from a unit trust is distributed according to the unit ownership in the trust.
Working with an expert in self employed home loans can make navigating lender policy and documentation requirements simple. We will advise which documents the lenders require, calculate your borrowing capacity, cash or equity requirements, repayments and much more.
Some additional items to be aware of as a self employed borrower are:
Our role as your mortgage broker is to make sure all policy requirements are met before an application is lodged. Get in touch today to see how we can assist you!
The documentation and information required for a self employed application can be very different to a home loan application for an employee. We will step you through all of the required documents for your unique scenario as part of your home loan application.
Some of the most common requirements are below:
Almost all lenders will require two years of returns and financials for self employed applicants. If you are a sole trader, this will be your personal tax returns but if you are using a company or trust structure the lender will also require tax returns and financial statements for this entity. You will also need to provide the two most recent Notices of Assessment issued by the ATO to go with your personal returns.
As part of your application, you will need to provide a personal asset and liability position. However, when you are self employed, any company liabilities also need to be disclosed to your mortgage broker. Some lenders will include these as personal commitments, while others may exclude them depending on lender policy.
If you are using a company or trust structure, the bank may have additional requirements to verify that entity. For companies, this may require a company registration certificate or company search and for trusts the bank may require a copy of the trust deed.
As with any home loan application, the lender you choose will conduct a credit check on you to view your personal and commercial credit history. It is critical that there are no adverse items on your file such as missed repayments, defaults or judgements. If you suspect you may have issues on your credit file, please let us know upfront so we can investigate.
Absolutely! While there are a few different requirements and the application is a little more complex, you can absolutely get approved for a home loan if you are self employed. That being said, most lenders will require you to have been trading for at least 2 years before accepting your income (though there are some specific exceptions to this rule).
We will confirm your detailed borrowing capacity as part of your preliminary assessment prior to applying with any lender. The factors involved in calculating this capacity are quite detailed and complex for self employed applicants, so it is important to work with an expert.
Yes, most lenders and their mortgage insurers do consider a self-employed applicant as a higher risk borrower. As a result, if you are borrowing over 80% of the property value, your lenders mortgage insurance premium will likely be slightly higher than if you were an employee.
