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Working for yourself comes with a number of benefits. Sure there’s hard work involved, but with that hard work comes the ability to run your business how you’d like, grow the business to the level you want and earn the income you want. Unfortunately, despite all this, you might still struggle to get a home loan. That’s because banks just love to make it hard for anyone with a small business to borrow money. Luckily not every lender has the same requirements for people who are self-employed or after a low-doc solution.
How do loans for the self-employed work?
There are a few things you should expect when beginning your search for your next home loan if you’re self-employed. As a self-employed borrower, some lenders may not see you as an ideal candidate because your income can be harder to verify. In many cases, you may be expected to pay higher interest rates than what are typically advertised by a bank or mortgage lender.
Keep in mind that you will also have to put a little more work into finding lenders who are willing to do business with you in the first place. Banks often shy away from lending that presents more risk in order to protect their own financial interests. This may impact the type of loan they are willing to offer you. For example, banks may require a lower loan-to-value ratio, meaning that you’ll need to come up with a larger deposit.
Low-doc home loan
A low-doc loan provides flexibility. Rather than asking you to provide the traditional income verification documents, including your last two years full financials and tax assessment notices, low-doc products will rely on alternative methods to verify your income. This might include viewing your business bank statements and BAS to evidence satisfactory income levels to support the loan.
So, how do I apply for a home loan?
There is obviously extensive planning involved, and we suggest you start your search at least two years before the big purchase. That way you’ll know the market, understand what you need to do to get the loan, and it will gives you the best chance to get the home loan you want. If you want to attract a sharp interest rate, remember that self-employed borrowers need to provide two years’ worth of tax returns, including tax assessment notices, to evidence that these have been lodged.
Your best option may be to seek out the services of a qualified mortgage broker who can do all the research for you, and find the best loan for your needs. Depending on your circumstances and how up to date you are with your financials, it may be that a low-doc home loan is the best option for you.
Purchasing a home can be one of the most rewarding investments you’ll make, both personally and financially. If you’ve done the research and know the market, you’ll not only have the freedom of running your own business, you’ll also be building a property portfolio at the same time.
Speak to a Liberty Adviser today about a self-employed home loan that could work for you.