Five tips for self-employed Australians looking to secure a home loan

Not long ago, self-employed Australians had to jump through hurdles to secure a home loan. It’s easier now than it used to be, but you still need to prepare before you apply. Whether you’re a sole trader, contractor, or business owner, here are five tips to help you get the right home loan for your needs.

1. Discover your options

Traditional lenders such as banks have reduced their client base for self-employed, but the good news is that there are a number of non-bank lenders who are happy to speak to you if you are self-employed. Take a look around and find a few options to compare before making a decision. Lenders differ in their criteria: In the case of a business income, some lenders use 80 percent of your business profits, others 100 percent; Some lenders count the write-off, others don’t. Therefore, it is important to speak to someone who understands your finances and will offer you, the borrower, the maximum level of service.

2. Get your business in order

The better your business records are organized, the better it will look to the lender. This means ensuring that:

  • Your company is structured correctly.
  • It is registered for GST.
  • Your BAS is up to date.
  • It has no outstanding debt.

Inconsistent income can be a problem, but being able to provide a lender with some financial statements can help your application by proving that you have a viable business going forward, even if you’ve had a bad year recently.

3. Get your finances in order

On a personal level, all savings must be in an account in your name, not someone else’s, and good credit is very important, so pay your bills on time. Credit reporting has become quite sophisticated now and if you don’t have a good credit record, you will run into problems. Your credit score should be above 700; below 700 and many lenders will automatically consider you a “no”, below 500 your chances become much smaller.

4. Talk to a specialist

Find a broker or lender specializing in self-employed clients who understands your position and you will benefit from their expertise and experience. Be open and honest when speaking to the person handling your finances and they will have a better idea of ​​your needs, goals and what is possible from the lender’s side.

Having someone on board who understands the challenges faced by self-employed borrowers — revenue volatility and income volatility, as well as small business issues like cash flow stagnation — can help find a broader range of different products.

5. Be flexible

Be aware that you may not be offered the cheapest loan to begin with, so be flexible about possible refinancing later on if circumstances change in your favour. As the real estate market evolves, it’s generally better to buy sooner rather than later, even if the interest rate is slightly higher, as the capital gains you make during this time often make up for the discrepancy.

In my experience, the self-employed are the most reliable borrowers in the country and should not be confronted with more stringent credit criteria as their finances are more complex than borrowers with more regular employment. The key to serving self-employed borrowers is a better understanding of their challenges and more flexible products to suit their circumstances, but it also helps if you, the borrower, come to the table with the right credentials and mindset. Five tips for self-employed Australians looking to secure a home loan

Adam Bradshaw

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