How to buy a property when you’re self-employed
When you’re self-employed, it can be harder to qualify for a home loan than if you’re an employee collecting a regular salary.
That’s because a small business owner’s income may be more variable, their financial position more complex and – in the eyes of lenders – their future employment less secure (due to potential doubt about the viability of your business). As a result, lenders may regard self-employed borrowers as less creditworthy and find their applications harder to assess.
Therefore, if you’re self-employed, any steps you can take to make your financial position appear more secure, predictable and transparent will strengthen your position as a borrower. Doing so could mean more lenders will be willing to do business with you, provide larger loans, and charge lower rates.
Here are some tips to help you do just that:
Pay yourself a regular salary. Lenders will be reassured if they see you collecting a regular paycheque (i.e. the same amount of money on the same date each month), because that will help them understand where you’d get the funds to make a regular monthly mortgage repayment.
Establish a robust business. Lenders will scrutinise your business financials as part of the application process. Reliable profits and cashflows will make a positive impression (and vice versa), because that will suggest you’re likely to have secure employment for years to come.
Get your records in order. The more business and personal financial documents you can provide during the application process, the more borrowing options you’ll have. Conversely, if you have limited documentation, you might be forced to settle for a low-doc loan, which will limit your choice of lenders and force you to pay a higher interest rate.
Improve your credit scores. When you apply for a home loan, lenders will almost certainly check your personal credit file – and probably your company’s credit file as well. The higher your credit scores, the more creditworthy you’ll appear in the eyes of lenders. You can improve your credit scores by paying all your bills on time, paying off loans, reducing the limit of any credit cards you have and minimising the number of credit applications you make.
Use a mortgage broker. If you approach a bank directly, your options will be limited, which could mean you don’t apply for the right loan for your circumstances. But if you use a broker, you’ll gain access to a large, diverse panel of lenders. Chances are, at least one of those lenders will be keen to do business with someone matching your particular profile.
We love helping self-employed people buy properties and know which lenders tend to be small business-friendly.
Licensing statement: Rayne Finance ABN [70 605 100 838] is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192. Disclaimer: (1) As with any financial scenario there are risks involved. This information provides an overview or summary only and it should not be considered a comprehensive analysis. You should, before acting in reliance upon this information, seek independent professional lending or taxation advice as appropriate and specific to your objectives, financial circumstances or needs. This publication is provided on the terms and understanding that: (2) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication. (3) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to the maximum extent permitted by the law to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.
Explore other FAQs and Facts
How redraw facilities and offset accounts can save you money
Offset accounts and redraw facilities both reduce the interest on your home loan by applying extra funds. Redraw facilities lower interest while providing conditional access to your money. Offset accounts, acting like savings accounts, offer easier access and higher interest savings, despite potential fees. Choose based on your need for fund accessibility and flexibility.
Federal Budget 24/25 – what does it mean for you?
Discovering the impact of the 2024/2025 Federal Budget is vital in navigating the current economic landscape. With a focus on addressing the cost-of-living crisis and bolstering the construction sector, measures such as infrastructure investment, rent assistance, and tax cuts aim to alleviate financial burdens and stimulate growth.
How a broker guides your way to owning your first home
Dreaming of your first home? A mortgage broker can be your guiding light. From assessing your borrowing capacity to breaking down costs and exploring deposit options, they make the journey smoother. With their expertise, owning your dream home in Australia becomes not just a dream, but a tangible goal.
5 things to keep in mind before refinancing
Considering refinancing your home loan? While securing the lowest interest rate is tempting, it’s vital to assess beyond that. Lenders vary in serviceability criteria, fees, turnaround times, and lending criteria. Additionally, explore promotions and consider restructuring your loan for optimal outcomes. Learn 5 key factors to save time and money.
How to calculate your equity
If you’ve owned your home for some time, you likely have built up equity—a valuable asset. Equity represents the difference between your home’s value and what you owe on your mortgage. Understanding this figure can empower you financially and open up opportunities for leveraging your home’s value.
7 ways to maximise your returns as a property investor
If you’re looking to maximise returns as a property investor, strategic decisions are key. From choosing the right location to savvy renovations, each step impacts your bottom line. And don’t forget about refinancing—regularly reviewing your home loan could unlock significant savings.
March cash rate held – why are buyers feeling more confident?
Following the Reserve Bank of Australia’s decision to keep the cash rate steady at 4.35%, there’s speculation about future cuts amid economic indicators showing weakness. However, rising buyer confidence and strong property growth, especially in housing, continue to drive the market forward.
When was your last home loan health check?
Is your home loan still serving you as it should? Over time, circumstances shift, potentially rendering your loan less than ideal. A home loan health check, conducted by your finance broker, ensures your loan remains competitive and aligned with your needs. It’s a stress-free process, offering potential savings and improved features, all at no cost to you.
What happens when your fixed rate term ends?
Fixed rate terms, typically lasting one to five years, define your loan’s interest stability. As this period concludes, your loan may shift to a variable rate unless you opt otherwise. Prepare by discussing potential rates and options with your mortgage broker. Consider repricing or refinancing for better terms, mindful of associated costs.
8 Ways to Strengthen Your Loan Application
Looking to bolster your loan application’s chances? Here are 8 practical steps to enhance your creditworthiness and secure that approval. From reviewing your spending to consolidating debts, each strategy is aimed at strengthening your financial profile.