Self-Employed Mortgage Loan
Are you self-employed or own your own business? If so, you might be aware that banks tend to make it really hard for clients like you to borrow money. In addition to the standard documentation, they ask for other information like tax returns and letters from your accountant. On the bright side, however, not every bank has the same requirements for self-employed clients. At Hunter Galloway, we have experience in helping a wide range of clients secure the mortgage loan that they need. As a result, we can offer tips and advice for finding a bank that will be most amenable to your situation.
Generally speaking though, in order to get a self-employed home loan, most lenders require that you be self-employed for at least two to three years. You must have proof of income during this time. However, if you have been self-employed for only a year, depending on other circumstances, Hunter Galloway might also be able to help you find a lender who is willing to help. The important thing is to have been in one line of work for a good period of time before this, as a new business has an element of financial uncertainty. For instance, a plumber who was employed for seven years might have decided to give it a try running his own business, which he has been doing for just over a year.
Self Employed Finance – Does It Have To Be So Complicated?
Banks have a specific way of calculating the income of self-employed borrowers. More often than not, these calculations turn out to be misunderstood, so we need to make sure that we go through each step of the assessment process ourselves to determine if your finances have been properly calculated.
At Hunter Galloway, these are some of the most common mistakes we see:
- Double dipping
Double dipping is when an income or an expense is taken into account twice. This represents a much lower income which will of course negatively impact your loan application.
- Company car
Lenders tend to ignore that a self-employed person can enjoy tax deductions for their company car expenses. This can make a difference to a self-employed client’s perceived earnings so we make sure to draw attention to this each time.
Sometimes bank staff might take their time in processing your application if you have a more complicated situation than usual. We take care of this by speaking to management and requesting that you be assigned an experienced loan assessor who will be able to process your application quicker than usual.
Self Employed Mortgage Loan Calculation
If you are self-employed, you must keep in mind that lenders generally think you belong to a higher risk category than other borrowers. Self-employed people are generally perceived to have an unstable income which for banks means that they are more likely to default on their loans. However, perceived risk also depends on your industry — for instance, a self-employed person in a construction firm may be perceived less favorably than one in an accounting firm. Risk assessment is based on a wide range of criteria so it is important to have someone who is able to decipher different aspects of your loan application.
Take a look at some of the ways that lenders calculate your income:
- If your income has been significantly varied over the course of the past two years, the lender may use the lowest of the income figures for the purpose of your income calculation
- Other lenders may use the most recent year’s income for the income calculation
- After the calculation, they may then add back expenses that are shown on your tax return.
The way your income is calculated as a self-employed person greatly determines the overall picture. In order to make the best possible impression on your potential lenders, our team of brokers at Hunter Galloway may pick which information to provide in order to make the best possible impression.
For more information about our entire approach to helping you compile a successful loan application as a self-employed individual, feel free to contact us. For a free consultation, call us today at 1 300 088 065!
Frequently Asked Questions
How long do I need to be self-employed for to get a home loan?
About 12 months is a good time frame – however, it really depends on your situation and deposit amount. The larger deposit and more job stability that you can show will help you.
How long does it take to get my loan approved?
Anywhere from 3 to 7 business days is the average time frame for a home loan to be approved however it depends on the stakeholders involved in completing your loan application’s turn around.
What are my chances of approval?
With Hunter Galloway 97% chance, we specialise in the difficult loans. With a wide choice of banks and lenders, this means that we can easily find the right one for you which overall increases your chances of getting approved.
Are your interest rates competitive?
We have 35 different banks and lenders and we negotiate deals with lenders that are off the market and only available to Hunter Galloway clients. This means that we can find you the most competitive rate due to not being stuck with just one bank.
What if my bank or another lender has already declined my application?
We deal with that every day, when your bank says no we say yes. We find a lender that’s going to give you the best solution. This isn’t uncommon and should not be something that deters you from applying again. Speak to us about your options and how we can get your loan approved.