Getting a home loan when you are a self-employed?
A whole lot of us are self-employed and on a surprising note, most of us are even aware that we would be treated as self-employed when it comes to borrowing money for a home loan. Let us look at how banks look at your income when they assess your application for a home loan so that you can tick off your dream home from the bucket list.
Working on ABN
When you are working on ABN (Australian Business Number), you are classified as self-employed. If your business turnover is great and you are transferring a certain amount of money every month to your spouse, she is still classified as self-employed because employee and employer are related.
Self employed for at least 2 years
Many lenders prefer the self- employed that have worked at least 2 years successfully at their business and require the ABN to have been registered at least for 2 years. If this is not the case, we need to look outside big lenders who can consider your application with less than 2 years ABN history, but there are some strings (higher interest rate, higher deposit requirement, etc.) attached to it.
Another point the lenders require is tax return for the business and individuals at least for one recent financial year. They check if your business is trading profitably and has any significant liabilities. They would also like to see if there is an unusual pattern for expenses in your business.
The taxable income (not the turnover amount!) you have declared on your tax returns are the basis for income consideration.
If you don’t have a recent tax return, but your business is doing well and you expect good return this year, then I suggest having a chat with us or any other brokers just before you go to see the accountant for tax lodgment. We can then quickly check whether the taxable income you are declaring would be enough for the borrowing you want to make for your dream home at the time.
If you can get your home loan adviser working closely with your accountant, you are one step ahead in your home buying journey.
If you would like to chat with us, you can book us on your preferred time from this link: Book an appointment and we can have over the phone. Or you can chat with one of our operators online during business hour through the website.