For many Australians, self-employment can allow flexibility and more freedom. However, a drawback for some self-employed individuals is difficulty in obtaining home loans.
With many lenders tightening their credit policies, borrowing can become tricky, especially for the self-employed.
For the self-employed, meeting the standard home loan lending criteria can be difficult, the process can take longer and larger deposits are required due to the increased risk of cash-flow fluctuation.
‘Low-doc’ home loan option
The low-doc home loan option is a more financing solution for the self-employed who have income and assets, but may not have the usual paperwork and standard income verification documents necessary to apply for a loan.
They generally do not require traditional proof of income. Lender dependant, borrowers will normally need to provide confirmation of their self-employment status – such as a registered ABN held for over two years.
Showing Proof of Income
Up-to-date tax returns and financial statements are generally needed to confirm and verify income. Lenders may even require one or two of the following:
- Business activity statements (BAS)
- Trading statements or
- A letter from your accountant
Are there lending limits?
However, there are often limits on the borrowing total, with lenders only allowing you to borrow up to 80 per cent (80% LVR) of the total purchase price before the additional requirement of lender’s mortgage insurance.
Traditionally, the interest rate offered is higher than for the standard variable rate, but recently this has been changing to bring these to the same level. Also, you can often transfer to a better rate once you are able to demonstrate your income.
Not every lender will accept home loans from low-doc borrowers and some will require more documentation, but this shouldn’t deter self-employed borrowers from seeking home loan approval. To help improve your chances of low-doc loan approval,talk to us about your options.
HOW WE SUPPORT CLIENTS
At Profy Finance and Wealth, we have supported clients who are looking to finance property, investments, homes, vehicles and businesses, through:
- Providing pre-approval reports with your buying power, including any LVR and LMI considerations
- Arranging valuation reports to guide you on potential offer prices
- Calculating and recommending finance options
- Arranging fully approved finance
- Arranging value add services such as building and contents insurance, depreciation reports, and legal conveyancing at preferred prices.
At Profy Finance and Wealth, we get more holistic results for our clients. Learn more about how we could help...