How can the self-employed get a loan?

By Graeme Salt

You run your own business and you have trouble getting a mortgage – that’s what used to happen; especially as many self-employed try to reduce their income to avoid paying too much tax.

But banks are now more creative in lending to the self-employed.

There really used to be just two options:

1 Show two-years’ tax returns.  This was always hard for the self-employed because it felt like they had to wait ages before they could buy a place (especially compared to their mates who had regular jobs)

2 Get a lo-doc loan.  Here the banks could be more creative, people could buy a home much quicker – but they often ended up paying a higher interest rate.

But now, with changes in work practices, banks are more creative with the self-employed.

Some banks will now just accept one year’s tax returns.  This is great if your business is relatively new but is doing really well.

Others are now even more creative, if they can see you are paying yourself a regular wage from your company, they can treat this as regular income (their logic is if you are organised enough to budget and pay a regular salary, you are organised enough for a home loan).  This is now really easy with software like Xero and MYOB.

And, lo-doc loans still exist.  Often lenders can use a variety of documents for you to prove your income.  These could include:

• BAS statements
• Business bank accounts
• Letters from your accountant

What many self-employed do here is, buy a home using a lo-doc loan (at a slightly higher rate).  Then, when their finances are stronger, refinance their loan as a full-doc loan – at a regular rate.

Getting a self-employed loan is easier than it used to be.   For the self-employed, their circumstances vary greatly.  If you want to talk about your own personal circumstances, please contact me.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your lending needs, please contact him on 02 9922 5055.