If you’ve tried to buy a home while self-employed or running your own business, you probably know just how complicated a self-employed mortgage Australia can be. Lenders have stricter requirements when you work for yourself, and understanding these can be tricky. Which is why Darren Walters, CEO and Founder of No1 Property Guide, has put together this article covering your questions and concerns about self-employed mortgages in Australia.
What is a Self-Employed Mortgage Australia?
A self-employed mortgage is essentially the same as a regular home loan, except with stricter criteria and conditions. Banks and lenders consider self-employed applicants as a higher risk than traditional wage/PAYG borrowers. Because of this, they implement slightly different criteria and rules to lower the risk for themselves.
The main change for most lenders is needing 2 years’ worth of financials. This basically means you need to prove your income over the past 2 financial years. Rather than the last 3-6 months.
Rach & Rosie – Happy Homeowners
The Smith Family – Happy Homeowners
In some cases, you may also need to provide additional paperwork to show the profitability of your company. Especially if you don’t pay yourself a regular wage. On the other hand, if you pay yourself a regular wage consistently, you’ll probably have an easier time and get a quicker approval.
If you’re not sure where to get started or if you qualify for a self-employed mortgage, don’t worry. Here at No1 Property Guide, our New Home Consultants are experts in helping renters become homeowners. Using Darren’s proven no or low deposit system, we can help you secure your new home. Even if you’re self-employed.
Jerry & Tara – Happy Homeowners
Are Self-Employed Mortgages More Expensive?
The great news is that self-employed mortgages in Australia, generally, aren’t more expensive! More and more Aussies are running their own business or working as freelancers. And the major banks and lenders have shifted their thinking to account for this.
This means that self-employed home buyers have the same great opportunities as PAYG buyers do. Of course, everyone’s situation is different. What loans and rates are available to you will vary depending on your situation.
What Documents are Required for a Self-Employed Mortgage Australia?
As mentioned earlier, there aren’t a lot of differences between a self-employed mortgage and a regular home loan. Which means the documents and paperwork you need to provide are similar.
The main difference is providing 2 years of financials. This is usually done using your last 2 income statements or an ATO notice of assessment. Other than this, you will also need to provide some other basic paperwork, like:
- Bank statements
- Proof of any other income or debts (like personal loans, credit cards)
Here at No1 Property Guide, our first step is calculating your borrowing capacity. This allows our team to accurately advise all your factual options without affecting your credit history or submitting a formal application.
Once you know your borrowing capacity, you can make an informed decision about whether you want to stay renting or become a homeowner.
Can I Get an Investment Property with a Self-Employed Mortgage Australia?
Absolutely! Self-employed mortgages are available for both owner-occupied and investment properties. Generally, lenders require more paperwork for an investment loan. Especially if you’re using equity or super. However, they’re still an option if you are self-employed and want to start building a portfolio.
At No1 Property Guide, the basic paperwork requirements for an investment loan are the same as a standard home loan. With just your 2 most recent income statements and some basic information, we can assess your situation and calculate your borrowing capacity.
Of course, if you are looking to use equity we’ll also need some additional information about your existing property. How long you’ve owned it, current equity, how much is owing etc. This is so we can accurately advise your factual options.
Sarah & Alan – Happy Homeowners
Leon – Happy Homeowner
Can I Improve My Chances of Approval?
When you’re looking to finally escape the rental nightmare and become a homeowner, it makes sense that you’d want to increase your chances as much as possible. When using Darren’s proven new home system, we’re able to accurately assess your borrowing capacity and find factual new home options to suit.
But there are always ways you can increase your approval chances, including:
- Reducing debts
- Increasing income
- Using equity
- Having a guarantor
It’s no surprise that reducing your debts and increasing your income is a surefire way to increase your approval chances. Having less of your regular income taken up by debts, or increasing the amount you have to spend, gives you more funds to pay your mortgage. And it is one of the biggest positive signs for lenders.
Using equity is another way to help secure an approval, as you’re using another property to reduce the risk to the lender. Which is also why having a guarantor helps your chances as well! Having someone else act as a guarantor for a portion, or all, of your mortgage, will significantly increase your chances of approval. As long as the lenders consider them a good guarantor of course!