Buying a home when self-employed

October 17, 2019 ∙ Articles

Self-employed borrowers come up against the challenge of not being able to simply present payslips and tax returns to back up their loan applications. This should not stop you buying your dream home.

Many lenders offer loans for self-employed borrowers who can’t hand over payslips and employment records. This means that, rather than the usual documentation, you prove your ability to service a loan using bank statements, declarations from your accountant and financial records.

Of course, as with any mortgage application, you must still prove that your income outstrips your spending and you can service the loan. Presenting this right to the lender can take a solid six to 12 months of preparation.

Here are some quick tips:

  • Pay down credit cards and personal loans, and be sure to lower the credit limits as they are paid down, as lenders assess the total credit available to you as a potential debt level, not just the amount you owe
  • Speak to a Connected Loans mortgage specialist about how the structure of your business and your taxable income will impact your ability to borrow
  • Saving a deposit is obviously important and showing your ability to live within your means while saving is too,
  • Speak with a Connected Loans mortgage specialist who have access to lenders that assess applications on a case-by-case basis and tailor their products to self-employed borrowers and contractors, while bank lenders do not

Loans to the self-employed do differ from standard loans in a few ways, apart from the application process.

Most lenders will insist on an LVR of no more than 80 per cent – meaning that under no circumstances will they lend more than 80 per cent of the property value, as assessed by the lender.

In cases where the loan amount is for more than 60 per cent of the property’s value, some lenders also require self-employed borrowers to pay for lenders’ mortgage insurance.

(Photo by MinuteKEY on Unsplash)