How to Get a Self-Employed Home Loan in Australia

Being self-employed brings a world of freedom and the ability to be your own boss, but when it comes to home loans, it often seems like a difficult puzzle to solve. But worry not, whether you’re an Australian expat living overseas or a foreign buyer keen to invest in the Australian property market, we’ve got you covered.

Let’s navigate through the fundamentals of self employed home loans to a step closer to your home ownership goal.

Self-Employed and Home Loans: A Complex Relationship

The financial freedom that comes with being self-employed can sometimes feel like a double-edged sword, especially when you’re trying to secure a home loan. Most lenders prefer consistency, and the unpredictable income of a self-employed person can be seen as a risk.

But, don’t let this deter you.

Understanding how the lending process works is the first step towards securing your home loan. Lenders usually assess your income over a period of time, typically two years. They’ll also consider the nature of your business, the industry you’re in, and the economic conditions at the time.

Having comprehensive documentation such as tax returns, bank statements, and a solid business plan can strengthen your application.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

How Much Can You Borrow?

Here’s a breakdown of how much you can borrow based on your self-employment status:

  • Borrow up to 95% of the property value: If you’re a self-employed borrower with one or two years’ tax returns to verify your income, you may be eligible to borrow up to 95% of the property value. This allows you to secure a home loan with a minimal deposit and get closer to your dream of homeownership.
  • Low Doc Loans: As a self-employed borrower with little to no income verification documentation, we have options for you too. With a low doc loan, you can borrow between 80% to 90% of the property value. This is an excellent solution for self-employed individuals who may not have traditional income evidence readily available.
  • Borrow up to 80% of the property value: If you’ve recently become self-employed and have been running your business for less than a year, you can still access a home loan. With our specialised programs, you may be eligible to borrow up to 80% of the property value, providing you with a solid foundation to begin your homeownership journey.

Australian Expats & Home Loans: Overcoming the Distance

Living overseas as an Australian expat, you might feel like you’re stuck between two worlds when it comes to securing a home loan for self employed. But, don’t worry, we’ve got some tips to help you navigate this unique situation.

Some lenders might be hesitant to lend to expats due to the perceived risk of foreign income, but there are lenders who recognize the potential and are willing to work with you. Here are some things you can do to improve your chances:

  • Maintain an Australian Bank Account: This can help demonstrate your ongoing ties to Australia.
  • Keep Up-To-Date Financial Records: These should include your overseas income and any Australian income or assets.
  • Maintain a Clean Australian Credit History: Make sure you meet any Australian credit commitments you have, such as credit cards or other loans.
  • Work With a Specialist: Consider working with a mortgage broker who specialises in expat home loans. They can guide you through the process and help you find the right lender.

Foreign Buyers: Securing a Self-Employed Mortgage in Australia

As a foreign buyer, entering the Australian housing market can seem like a challenging endeavour. But, it’s certainly not impossible. You can access self-employed mortgages, but there may be additional requirements or restrictions.

Understanding the Australian property market is crucial. Ensure that you seek professional advice to understand these nuances, and be prepared with all the necessary documentation. This could include proof of income, visa status, and valid identification. Also, be aware of any potential restrictions on the type of property you can buy, as foreign investment rules may apply.

When considering properties, factor in potential additional costs like stamp duty and potential Foreign Investment Review Board (FIRB) application fees. Remember, a strong application and a well-structured business plan will be your best allies in this journey.

So, You're Self-Employed Under 2 Years? Here's Your Home Loan Guide

What if you’re a budding entrepreneur with a business that’s less than two years old? You might feel like the odds are against you, but rest assured, there’s still hope.

While traditional lenders might be hesitant, there are specialised lenders who offer home loans for self-employed under 2 years. They might require more documentation and possibly a higher down payment, but getting a home loan is definitely not out of reach.

You can strengthen your application by demonstrating consistent income over the time you’ve been in business, providing evidence of future work or contracts, and showing a steady increase in your business revenue. Additionally, maintaining a good credit score and having a healthy deposit saved can improve your chances significantly.

Making the Grade: Building a Successful Home Loan Application

Achieving success in your home loan application as a self-employed individual is about more than just having a great business. Here are some key steps to take:

  • Maintain Comprehensive Records: Lenders love paperwork. Keep your financial records, personal and business bank statements, tax returns, and profit and loss statements up-to-date and readily available.
  • Understand Your Borrowing Capacity: Your income, expenses, existing debts, and the number of dependents you have all affect how much you can borrow. Use online calculators to estimate your borrowing capacity, or work with a professional to get a clear understanding.
  • Improve Your Credit Score: A higher credit score can increase your chances of getting approved. Pay your bills on time, reduce your debt, and ensure there are no errors on your credit report.
  • Save for a Larger Down Payment: The larger your down payment, the less risk for the lender. This could mean lower interest rates and better terms for your loan.
  • Seek Professional Advice: Mortgage brokers understand the landscape of self-employed home loans and can guide you to the right lenders, helping you present a strong application.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Common Mistakes Made by Banks in Assessing Self-Employed Borrowers

When it comes to assessing the income of self-employed borrowers, banks often make mistakes that can affect the loan approval process. At [Your Company Name], we are well aware of these errors and take proactive steps to ensure accurate assessments. Here are some common mistakes made by banks:

  • Lack of Understanding: Bank staff may lack experience in handling complex trust structures involving multiple companies and trusts. This can lead to a lack of understanding of your income, especially if you receive income protection payments. We work closely with your accountant to provide clear explanations to the assessors, ensuring they fully comprehend your financial situation.
  • Double-dipping: Double-dipping occurs when a lender considers the same income or expense twice. For example, they may include net profit before tax and also accept dividends paid to a director as income, or they may count an expense twice, such as failing to add back interest on loans. We meticulously review your financials and bring attention to any instances of double-dipping.
  • Ignoring Company Car Benefits: Lenders often overlook the tax benefits that self-employed individuals derive from deducting their car expenses within their company. In our notes to the lenders, we always highlight this important aspect to ensure it is appropriately considered in the assessment.
  • Procrastination: Although not technically an error, bank staff sometimes delay processing complicated loan applications intentionally. This can result in unnecessary delays. We address this issue by liaising with management to assign your loan to an experienced assessor who thrives on challenging applications and can expedite the process.

How Lenders Calculate Self-Employed Income

Lenders typically rely on past tax returns to predict the stability of your business in the future. However, different lenders adopt various approaches to calculate your income, which can significantly impact your loan application, especially if you are self employed. Here are some common methods:

  • Lowest Income Figure: Some lenders consider the lowest income figure from the last two years when assessing your loan application.
  • Most Recent Year’s Income: Other lenders focus on the income reported on your most recent tax return as the primary basis for calculation.
  • Average Income: Certain lenders may average the income from the past two years or take 120% of the lowest year’s income.

Additionally, lenders may or may not add back expenses reported on your tax returns. In some cases, lenders may accept six months’ payslips and a letter from your accountant as an alternative to providing tax returns and financials.

It is crucial to understand that each lender interprets tax returns differently, considering factors such as your entrepreneurial skills, industry experience, and industry risk profile when assessing your income.

What if You Generate Your Own Income?

Under a new policy from one of our lenders, you may be eligible for a loan based on the following criteria:

  • Two payslips or three months’ salary credits plus an Accountant’s Letter can be used as substitutes for traditional income documentation.
  • All self-salaried income is treated as PAYG (Pay As You Go).
  • Your business should have been operating for at least two years, with a minimum of three months of salary payments.
  • This particular loan program does not require Notice of Assessments (NOAs), tax returns, or financial statements.

These criteria offer a streamlined process for self-employed individuals who generate their own income, making it easier to qualify for a loan.

Exploring Your Options: Understanding the Landscape of Self Employed Mortgages

The world of self employed mortgages is vast, with traditional banks, credit unions, and non-bank lenders all offering products that could be right for you. Understanding the pros and cons of each can help you make an informed decision.

Traditional banks often have stricter criteria but may offer lower interest rates. On the other hand, non-bank lenders are often more flexible with their criteria but may have higher interest rates.

Working with a mortgage broker can help you navigate this landscape, providing you with the information you need to find the best fit for your circumstances.

Your Journey to a Self Employed Home Loan Starts Now

Securing a self employed home loan doesn’t have to be an intimidating journey. With the right guidance and preparation, you can navigate the intricacies and secure your dream home. Whether you’re an Australian expat living overseas, a foreign buyer, or a local self-employed individual, there are options for you.

Remember, securing a home loan isn’t just about today, it’s about your future. So, start planning, get your paperwork ready, and take that first step on your path to home ownership. Your dream home might be closer than you think.

Apply for a Self Employed Home Loan Today!

Don’t let the intricacies of the home loan process keep you from your dream home. We’re here to provide the expertise and guidance you need. Whether you’re self-employed, an Australian expat, or a foreign buyer, we’re here to guide you.

Contact us today for a personalised consultation. Together, we can make your dream home a reality.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently asked questions

The minimum income varies by lender and loan product. Some lenders may have a set minimum income, while others evaluate based on your ability to service the loan.

Maintain comprehensive financial records, understand your borrowing capacity, improve your credit score, save for a larger down payment, and seek professional advice.

Generally, you’ll need two years of personal and business tax returns, profit and loss statements, bank statements, and a list of assets and debts. For businesses under two years old, evidence of future work or contracts can be beneficial.

Being an Australian expat can present some challenges when securing a home loan due to the perceived risk of foreign income. However, maintaining a clean Australian credit history, keeping up-to-date financial records, and working with a mortgage broker who specialises in expat home loans can improve your chances.

Foreign buyers should be aware of potential additional costs, like stamp duty and FIRB application fees, and possible restrictions on the type of property they can buy. They should also be prepared with necessary documentation, including proof of income, visa status, and identification.

Odin Mortgage Logo
Featured In
Geo Expat Logo
Asia xpat Logo Logo
Expat Living Logo
Easy Expat Logo

10 Best Tips for Australian Expats to Maximise Borrowing Power & Approval Success