Loans for self employed don’t have to be difficult and hard to be approved as banks or other lenders tend to make out. Home Loans for self employed are more difficult to assess and do have additional requirements but knowing how to best prepare your financials and yourself to apply for a self employed home loan will give you the best change possible for be approved. This article will discuss how best to prepare for loans for self employed.
Financials for self employed home loans
The best thing you can do for yourself is get your financials up to date. This is really important if you don’t have much of a deposit. Deposits for low doc loans for self employed are a minimum of 20%. If you have your financials (this means tax returns, trust and company returns and ATO notices) you only need to put down just over 5% plus purchase costs. Remember you won’t need the most recent tax returns completed until March/May of the following year as banks are happy to wait till then to request more recent tax returns. An example is returns for the 2011 to 2012 tax year are only required by 30th March 2013. There is a few lenders that can wait till May 2013 for their self employed home loans. This gives you plenty of time to organise your tax returns. We have some banks that only require the most recent year but most will average the last two years. If there is more than a 20% variance in income then some loans for self employed will only limit the increase to 20% unless a good explanation can be provided.
I don’t have financials, what’s my options?
The only other options if you can apply for a lo doc home loan or a low doc home loan as some lenders describe it differently. These loans allows self employed borrowers to not provide tax returns but you will need to provide either one of the following:
- Accountants letter confirming expected income last year, or
- Last 6 months of your business trading account, or
- Last 12 months of BAS statements
The banks will then use their own formulas for calculating income from the above methods for their loans for self employed. Depending on what the above documentation shows will determine the maximum loan amount you can borrow.
Lo doc loans for self employed are limited to 80% of the property value so you will need a larger deposit then normal. For loans above 60% of the property value there is a risk margin added to the interest rate so you will pay a slightly higher interest rate in comparison to a full doc loan for self employed.
I’m a Contractor, are there other options?
YES, if you contract to an employer and work on a per hour basis or day rate and earn more than 70% of your income from that source, we have lenders that will use this income as though you were self employed. You must not need to provide materials for your work such as a carpenter buying his own wood. These loans are called loans for contractors or contractor home loans. We supply two of your latest invoices just like payslips if you were employed and obtain a letter from the company you contract to confirm in writing your hourly or day rate and the number of hours or days you must work.
The contractor home loans are limited to 80% of the property value but the deposit can come from any source. Home loans for contractors are a great way to apply for finance without showing tax returns.
Can I still have normal features for self employer loans?
Yes, just because your are wanting loans for self employed borrowers, you can still have fixed rates, variable rates, offset accounts, redraw plus repayment options such as principal and interest and interest only. There are some banks that can restrict their feature on their loans for self employed so we tend to steer clear from those.
We specialise in harder to approve home loans and we have expert knowledge on loans for self employed as we too are self employed and for our own interests we ensure the best loan for ourselves to which we also share with our clients.
We encourage you to contact us below or make an enquiry to learn more about loans for self employed.