October 24, 2024 by Rhye Livingstone
The self-employed lifestyle is an increasingly popular choice for those seeking independence, flexibility, and the potential for unlimited growth. Whether you're considering freelancing, consulting, or starting your own business, the path of self-employment offers numerous opportunities but also comes with its own set of challenges.
If you're self-employed and seeking finance, the requirements for applying for a home loan can vary between lenders.
However, here is a general guideline of some common documents you may need to provide:
- Proof that your ABN has been registered for at least two years
- The last two years' personal and business tax returns, along with tax assessment notices
- Balance sheets and profit and loss statements for the most recent two years
- Details and statements of any external liabilities, such as leases, hire purchases, overdrafts, company loans, or guarantees
- The last three months of business bank statements
If you’ve been self-employed for less than two years
To obtain a home loan as a self-employed individual, it’s generally required that your business operates for at least two years, though some lenders may offer exceptions.
There are still options available if you have not yet reached the two-year mark. For instance, if you do not have two full years of business experience, some lenders may accept proof that you have worked in the same industry for over two years and may ask for old payslips and references from previous employers to demonstrate your work and income history before starting your own business.
Low Documentation (Low Doc) Home Loans
A low doc home loan is designed for self-employed borrowers who may not be able to provide the conventional proof of income typically required for standard home loans.
A low doc loan can be advantageous as it involves a simplified income declaration form and alternative forms of income evidence instead of tax returns. However, it’s important to note that this type of loan still requires proof of income, just through alternative documentation.
While a low doc loan is a useful option for self-employed borrowers, lenders may view it as higher risk. As a result, it may come with a higher-than-average interest rate and stricter limitations regarding the maximum loan-to-value ratio (LVR).
Not all lenders offer low doc loan options, so it’s advisable to consult with an experienced mortgage broker to explore your options and determine the amount of loan you can realistically manage.
Ready to explore your mortgage options? Consult with Mortgage Choice today to discover what opportunities await you.
Please call me on 0459 958 893 or email me at rhye.livingstone@mortgagechoice.com.au
