How Self-Employed Australians Can Secure a Home Loan
For many, the dream of being your own boss is a great Australian ambition. But when it comes to getting a home loan, being self-employed can present unique challenges.
Lenders tend to view self-employed borrowers as a higher risk due to the variability of income. Unlike employees with consistent salaries, self-employed individuals often have fluctuating earnings, making it trickier for banks to assess their ability to make regular repayments. If you’re one of Australia’s 2.6 million small business owners or one of the one million independent contractors, here are some strategies to help you secure a home loan.
1. Show Business Stability
Lenders prefer borrowers who have been in business for a while. Holding an Australian Business Number (ABN) for at least one to two years demonstrates that your business is stable and generating a consistent income. The longer your track record, the more confident lenders feel about your repayment ability.
2. Provide Proof of Income
Unlike employees who can present pay slips, self-employed individuals need to provide additional documents. Most lenders will require financial statements from the past two years, including personal and business tax returns. In some cases, business activity statements (BAS) or an income statement signed by your accountant may be sufficient. Since requirements vary, speaking with a mortgage expert can help clarify what you’ll need.
3. Show Other Assets and Savings
A healthy savings record, personal investments, or other assets can go a long way in convincing lenders of your financial reliability. Having personal savings shows a capacity for consistent saving, which can reassure banks that you’ll manage home loan repayments responsibly.
4. Be Honest About Income and Expenses
Under-reporting income or exaggerating expenses can hurt your borrowing capacity. The Australian Tax Office (ATO) estimates that about 10% of small businesses either under-report or over-claim expenses. While this may seem like a way to reduce taxes, it will also reduce the income figure that lenders assess, potentially lowering the loan amount they’re willing to offer you.
5. Consider Low-Doc Loans
If you don’t have all the documents required for a standard home loan, you may want to explore low-doc loans. These loans are designed for self-employed borrowers who may not have comprehensive documentation. The downside is that low-doc loans typically come with higher interest rates due to the increased risk for the lender. However, if you demonstrate a solid repayment history, you might be able to convert your loan to a full-doc loan with a lower interest rate over time.
Not all lenders offer low-doc loans, so it’s important to consult with an expert to find out which options are suitable for you.
6. Get Professional Help
As a business owner, you may find it hard to navigate the loan process while managing your daily operations. That’s where we come in. At Clark Finance Group, we specialise in helping self-employed individuals secure home loans. We’ll work with you to assess your financial situation, explore the right options, and guide you through the process, saving you time and effort.
Whether you’re buying or refinancing, we’re here to support you every step of the way. You can book an obligation-free appointment [CLICK HERE] to get started today.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
