While there are many lenders who will provide mortgages for the self employed, there are a few things you will need to be aware of before starting the process.
Paperwork Requirements
The evidence of income between employees and self employed people is vastly different. If you are self employed, most lenders will need copies of your tax returns, business activity statements and company financials for the last two years to determine and assess your income consistency.
Additional information on ABN and time in business, as well as statements from business accounts may also be requested.
Income Consistency
Dependable income sources are critical to lenders, especially when borrowing to purchase a home. For most people who are self employed, income and expenses can vary dramatically depending on season, contracts and marketing activities, especially when the business is in its first couple of years of trading. Large differences between tax returns, typically more than twenty percent, will require additional evidence and explanation.
Having an accredited accountant track your income and expenses, plus making sure your paperwork is in order, can greatly assist when you need to borrow. Working closely with a Mortgage Broker before you need funds can also provide value, as they will be able to guide you on the requirements, both from documentation and lender expectations, and allow you to work with your accountant prior to submission.
Low Doc Mortgage
Though less popular these days, low doc mortgages are still available, although they usually attract higher interest rates and fees. Some lenders specialise in this area, with generally less documentary requirements e.g last tax return. Make sure to have your Mortgage Broker review the potential costs before using this option.
Improve your Credit Score
Ensure you keep any credit card debt low and always pay your credit cards, and your bills, when they are due. Lenders will review your credit score when determining your ability to repay a mortgage. Significant change is occurring in this space this year, if you want to know more visit creditsmart.org.au