How to get a home loan if you are Self Employed?
You run your own business and you have probably asked yourself what you need to do to get a home loan? You may have heard it is a little harder for someone who is running their own business? Or that you will need to jump through a few more hoops to get one? You will be happy to know that this is not always the case. Yes, you may require a little more information and have to be on top of your books, but with the right guidance it can be a breeze! If you are looking to buy your first home, second home or planning on re-financing and you own your own business then read on.
PROVING YOUR INCOME
Self employed income tends to be more complicated as it’s not as simple as providing your payslip. The bank needs to determine your income from your business and will rely on tax returns, financial statements, business bank statements and possibly BAS statements.
In some cases you may need to present records from the last two years so make sure you are up to date with your accounts and tax returns. When a lender determines how much you can borrow, they will generally base their calculations on the profit from the business over the last two years, so making sure your accounts are in order is very important. If you have not done that this financial year, then now is a good time to start getting the finances in order and ready for the next financial year.
HOW MUCH MONEY CAN I BORROW?
This is where having an experienced broker, by your side, who can assist in this process is important. Due to the complexity of the information, determining how much you can borrow requires experience and a good knowledge of financial statements and tax returns.
Make sure you have the right partner as this can have a major impact on how much you can borrow and the information you require. Here at Lime Mortgage Brokers our background is accounting, so understanding financials and tax returns is our specialty.
Borrowing power is a function of your income, so make sure you are budgeting to keep your expenses under control and stream lining your debts (reduce unused credit limits and don’t take on unnecessary debt where you don’t have to)
It’s also really good to check your credit score. You can find an earlier Blog we wrote on this at https://limemortgagebrokers.com.au/your-credit-score-what-can-affect-it/
DO I NEED A HUGE DEPOSIT?
This is a misconception. If you have regular annual financial statements and tax returns completed then the answer is “NO”. We can assist you with getting the same loans accessible by those that are not self-employed. If you have not kept good accounts for any reason, you may then need a higher deposit to offset the risk the lender is taking, by lending to you without current financial statements and tax returns.
WHAT YOU NEED TO DO RIGHT NOW
- Get all your records and accounts up to date
- Consult with your accountant and have them help prepare your accounts and tax return for you
- Speak to a Mortgage Professional to have a look what financing options are available to you
WHAT NOT TO DO
- Do not minimize your income for tax purposes, this will have a huge impact on your eligibility for a home loan
- Do not assume that it’s impossible to get a mortgage if you are self employed
Here at Lime Mortgage Brokers we want to help you achieve your dreams. We like to share our knowledge and experience with you. We can help steer you on the right path or help you get into your dream home sooner than you thought possible. We have access to several lenders and ones that deal with self-employed loans, so we know where to go. Give us a call or send us and email so we can discuss your current situation.
“our knowledge and experience is yours”
The information contained on www.limemortgagebrokers.com.au website and posts is for general information purposes only. Lime Mortgage Brokers assumes no responsibility for errors or omissions in the contents of this publication. The information we provide may not be relevant for all individual circumstances. You should always seek professional advice before you take action in relation to any of the matters in this publication.