Getting a loan when you’re self-employed

Getting a loan when you’re self-employed

There’s a lot of appeal to being self-employed. Sole traders or small business owners enjoy freedom, flexibility, and the chance to adapt their work to best suit their interests and skills.

But if you’re self-employed, how does it affect you getting a mortgage? Here, we help you navigate the process.

Get your paperwork in order

Employees generally need to show the last two or three payslips and a recent income statement to prove their income. For self-employed people, it’s a little trickier. Most lenders will need to see tax documentation from the last two years in order to adequately assess your income.

You may need to provide evidence of GST registration, and your ABN or Certificate of Incorporation. You may also have to provide recent statements for your business transaction account.

Income consistency

If there are question marks about your income, it might work against you when you try to take out a mortgage.

Lenders are looking for a steady flow of income. If you’re self-employed, income and expenditure may fluctuate year to year, especially if you have start-up costs. If there is a big discrepancy between your tax returns, you might need to substantiate the variance by providing additional evidence.

It’s worthwhile using an accredited accountant to help track your income and expenses, and make sure everything is airtight. Talk to your broker and accountant about which documents you need to provide, to improve your chances of securing a mortgage.

Have a great credit rating

Keeping your credit card debts low and your repayments swift will work in your favour when lenders assess your eligibility for a mortgage. Do all you can to prove your integrity to the lender, to better your chances of eligibility.

Choose the right lender

Some lenders go out of their way to attract self-employed people looking to take out a mortgage, whilst others rarely offer loans to small business owners. Some lenders will determine your ability to make loan repayments based on the most recent year’s financial documentation, whilst others take into account variations between the past two years. Some lenders will take into account GST implications and others will not.

Do you see the pattern? The fact is, with so many variables it’s not easy to know where to start to find the best loan for your circumstances. One way to navigate the pitfalls and opportunities is to talk to an expert like your Smartline Mortgage Adviser who has in-depth knowledge of the requirements of a wide range of lenders.

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.