Getting the money to buy when your Self Employed

With a little time and some extra documentation, it’s not difficult to get a home loan if you’re self-employed. If time is at a premium and you don’t enjoy extra paperwork, then a mortgage broker can help to smooth your way.

Taxable income
It is an important issue for the self-employed to consider is taxable income.

Taxable income declared by self-employed people is often reduced, as accountants look for as many tax deductions as they can achieve, this means the income lenders usually assess for a home loan, doesn’t often take into account true cash flow.

Two years’ documentationThe majority of lenders will expect you to have been trading for at least two years and will perceive your income to be the wages you draw, plus your share of any profit being made by the company. Standard evidence requirements can be two years of financials for personal tax and two years for company tax, plus interim returns for the business.

Most lenders will average those accounts, which is usually to the detriment of the self-employed person, you can also run into difficulty when you are half way into a new financial year and the tax returns for the previous year have not yet been completed.

Get help from the startGetting professional help will make the process easier. Use an experienced mortgage broker who knows which lenders apply the rules. For example, which lenders will use the latest years figures if they’re better than the year before, instead of averaging; and which lender will use one years trading instead of two.

You also have the option of a low documentation loan. If you do not have all your paper work together but have a 20% deposit you may want to consider this option. Generally, you will need to show that you have been in business for atleast 12 months. The lender will want to see that you have had a registered ABN for this period. You will need to declare what your income is, but you won't need to produce the paper work that you would normally repuire. Many lenders will 'load' the interest rate that will be applied to the loan, but there are lenders that do not do this. So it is important to speak to your broker to find the best loan for you.

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