First Home Buyer
2 December 2015

Self Employed

My Background is accounting. Had a double major Accounting and Finance.

Complex loans? Which involves trust companies? I love crunching the numbers

Banks just love to make it hard for anyone with a business to borrow money!

They want everything tax returns, notices of assessment and then letters from your accountant, making applying for a loan incredibly difficult.

Luckily not every bank has the same requirements for the self employed!

Actually it’s not that hard if you had a good accountant who would have all these emailed to you.

How long do I need to be self employed?

The majority of lenders require you to be self employed for at least two years, however some can consider people who have been self employed for only one year!

If you have been self-employed for one year or more, speak to us today call 0449999881 or contact us online to find out how you can get approved for a mortgage.

Well even if instances, if the Rent can service the loan itself if you have a few unencumbered property, the lender might not even need to see your tax return.

What if i am self employed less than 1 year?

If you have been self employed for less than one year, then unfortunately there aren’t many options.

We will have to look at other options like, if you are over 55, your superannuation drawings can be a income too.

Speak to us and we will see what options you have.

What if I am self employed for more than 1 year but less than 2 years

If you have 1 year full financials depends on which bank you bank with you might get a loan, sometimes, you have set up the ABN for 2 years already but we only traded for the most recent year, and you have 1 year financials.

Banks sometimes make mistake too, We can fix the problem

We often see mistakes in the way that the banks calculate the income for self employed borrowers.

For complex loans we make extensive notes, when needed have direct access to assesor(depends on which bank) to make sure they have assess it correctly, sometimes if the deal is strong bank could make a policy exception.

The most common mistakes we see are:

Lack of understanding: Complex trust structures with multiple companies and trusts are often handled by bank staff that lack the experience to understand what is actually happening with your income. In these cases we would talk to your accountant and then talk to the assessor to ensure they understand exactly what is going on.

Your taxable income alone isn’t the same as your actual income that you can use to pay your commitments, including the repayments for the new mortgage. So lenders add back any expenses that you have incurred that reduced your taxable income, however are not a “real” expense or ongoing commitment.

By adding back expenses you can increase your assessable income and your borrowing power!

Below are some addbacks to add to your servicing:

  • Interest expense – Where the interest expense is to continue, the related commitment must be included in servicing
  • Depreciation expense – The write down of assets used in producing income
  • Amortisation – The write down of intangible assets
  • Lease/Hire Purchase – Where the lease/hire purchase is to continue, the related commitment must be included in servicing
  • Non-recurring expenses – Full details of the non-recurring expenses are necessary to justify why it should be added back
  • Non-recurring income (deduction) – Details of the non-recurring income must be obtained
  • Superannuation* – The amount paid in excess of the compulsory superannuation contribution set by the ATO

See there are many potential add backs, we will trace the money back to the source. We have proper understanding of what to do to maximize your borrowings.

Most lenders believe that by looking at your past tax returns they can predict how stable your business will be in the future.

Tax returns and ATO notice of assessments are different, to calculate for income we have to consider the addbacks.

Lenders are mostly worried if there are large increase or decrease in income but mainly decrease.

Types of scenarios for income for the 2 years

1) Lender may use the lowest of the income figures for the last two years.
2) Lender may use the most recent year’s income as shown on your tax return.
3) They might not allow certain addbacks

Sometimes a lot of non cash items that will lower your profit hence lowering your income tax that’s that normally accountant will do. As you can imagine this makes a big difference to your loan application! Different lenders assess the application differently. They may even ask for past PAYG employment contract to gauge your experience.

Either way we will choose the best possible bank to put your application through for the best result,

1)Business Activity Statements (BAS),

2) Bank account statements for the last six months showing your money coming in.

We do our best to find the lender that will look at your documents that is in your favour

Please contact us on 0449999881 or enquire online and we can help you find the right lender who will assess your income in the best possible way!

By March or April each year most lenders begin to ask for tax returns for the most recently completed financial year. Up until that point you can provide the tax returns from the year before!

So, for example, if you applied in January 2015 most lenders would require your tax returns for 2012 and 2013, however in March 2015 most lenders would require 2013 and 2014 returns.

Of course there are always exceptions! One of our lenders can accept older tax returns as an exception to their normal policy. This is useful for people who haven’t had a chance to lodge their most recent return.

One of our other lenders only requires one years’ tax returns. This is useful for people who have had a bad year the year before or who only recently started their business.

If you are borrowing in a company, trust or partnership then you may get referred to business banking. Avoid!

Some of our lenders will approve company home loans and trust home loans at standard residential rates.

You may have to pay slightly higher fees because of director needs to personally guarantee the loan.

For more information or to apply for a loan, please contact us today on 0449999881 or enquire online. We can help you get approval!

If you are self-employed and looking to get finance, please speak to us!

You should know your finances better than anyone else, only apply for a home loan when you feel the business is stable, if not it will only add to your stress.

We can read financials correctly, we can explain stuffs to banks, but we cannot really fully assess your true financial situation whether or not your business is stable. Don’t gave yourself unnecessary financial stress.

Talk to us on 0449999881 or enquire online to obtain a quote from a lender that will be best suit your situation.

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