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As a conventional employee, demonstrating proof of income is as simple as providing your lender with your most recent payslips. For self-employed borrowers, it can be more complex. It doesn’t have to be a major issue; lenders want your business after all, but the process of verifying that you earn enough money to pay off a home loan can be more arduous. Lenders often have stricter requirements on self-employed borrowers, and generally need more information to be satisfied the risk isn’t unacceptable.

Why self-employed home loans are harder to get

Employment length

In Australia, some lenders have minimum requirements for how long a borrower has been self-employed. For example, many lenders prefer a borrower's business to have been established or trading for at least two full financial years.

However, it's also worth pointing some lenders have more flexible criteria, potentially considering those with a shorter period of self-employment, especially if they have a good credit history, substantial savings, or can show the business is in a solid financial position with strong income. Lenders may also allow those who previously worked in the same industry before going self employed (an electrician who has recently gone into business for themselves, for example) to use old payslips and references to supplement their application.

Inconsistent income

Self-employed borrowers often have income that fluctuates, unlike employees who receive the same wage packet each week. An air conditioning repair person for example might see a surge in business from November to March, then be significantly less busy during the cooler months. This can make it harder to show a stable financial position and might mean a lender requires more information.

Higher rates and fees

Since self-employed borrowers are often perceived as higher-risk, this can mean higher interest rates or additional fees compared to borrowers who are employees.

More scrutiny

Self-employed borrowers often undergo a more rigorous assessment of their application. Lenders might require additional documentation such as profit and loss statements, business bank statements or GST returns to assess the health and stability of the business.

Read more: Improving your chances of being accepted for a home loan

How much deposit do I need for a self-employed home loan?

Generally, you may need a larger deposit compared to someone with a regular PAYG income. For self-employed individuals, lenders typically require a deposit of at least 20% of the property's value. This requirement is primarily due to the perceived higher risk associated with self-employed income, which can be more variable and less predictable than a regular salary.

Is it hard to get a home loan self-employed?

Securing a home loan while self-employed can indeed present more challenges compared to individuals with a regular income. Lenders scrutinise your financial stability and income consistency more closely. They typically require at least two years of business financial statements, tax returns, and notices of assessment to verify your income. This documentation helps lenders assess your ability to service the loan.

While it is more challenging, it's certainly not impossible. Many lenders understand the nature of self-employed income and offer specific loan products tailored to meet these unique circumstances. It’s important to keep your financial records in good order and be prepared to show consistent income over a couple of years.

Income verification for self-employed home loans

There are several different documents lenders might require in lieu of payslips. Below are some of the most common, but this is not an exhaustive list. Depending on the situation, lenders might ask for other details and documents, so if you are self-employed and think you might be in the market for a home loan at some stage, it pays to keep organised with your financial records.

ABN registration

Lenders will often want to have a look at the Australian Business Number (ABN) details of your business. This is usually to verify how long the business has been trading for.

Personal tax returns

Another handy way to demonstrate income is to simply show your lender what you have declared to the ATO you earn. This demonstrates your earnings, as well as your financial stability.

Business Activity Statements (BAS)

Quarterly Business Activity Statements can show your quarterly gross trading income as well as capital and non capital purchases. This can be a great alternative if you are behind with lodging your tax returns or if the income in your returns does not accurately reflect your current trading situation.

Accountant’s declaration

If your accountant prepares your quarterly BAS returns and management accounts, they will be in a pretty good position to assess your current trading situation. An accountant's declaration will include how long they have been your accountant, verify the amount of income you have declared and agree that to the best of their knowledge, this amount is reasonable and accurate. They also acknowledge that they are not aware of any factors which will affect your ability to meet the repayments.

Mortgages for self-employed people

Most recent census estimates suggest more than 10% of the Australian workforce is an owner-manager of an enterprise without employees. Naturally, this has led many lenders to develop special products or procedures to help self-employed borrowers qualify for home loans.

Low Doc Home Loans

Many lenders have ‘Low Doc’ home loans, with less stringent requirements to demonstrate income. This can be particularly useful for those who have been self-employed for less than two years. Low-doc loans still require some evidence and also might have higher rates and fees than equivalent products

CommBank

CommBank offers a simplified income verification process for eligible self-employed borrowers, who don’t have to provide their business or personal financial statements. Borrowers need to provide one of the below:

  • Most recent personal tax return and Notice of Assessment

  • Six-month salary credits to an account

  • One payslip showing > six months YTD income

  • One payslip showing < six months YTD income and most recent financials year PAYG Payment Summary/'Tax ready' Income Statement or Tax Return

This needs to be supplemented by a letter from an accountant advising the business has sufficient profits to meet the business commitments and that the business has traded profitably for the past two years.

Westpac

Westpac’s Fast Track assessment process requires the following:

  • Past two years of personal ATO notices of assessment

  • Self-employed for at least two years

  • Have a deposit of at least 20%

  • Not be relying on any other source of income other than that shown in the Notice of Assessment

ANZ

ANZ also offers a streamlined self employed income verification for those who have been paying themselves a regular company wage for at least six months. To apply, you’ll need the following:

  • A valid ABN/ACN registered for at least 18 months

  • A payslip dated within 60 days

  • Your most recent ATO income statement with YTD salary. If this has less than six months' worth, you will also need to provide the previous year’s income statement

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
Featured Online ExclusiveUp to $4k cashback
  • Immediate cashback upon settlement
  • $2000 for loans up to $700,000
  • $4000 for loans over $700,000
5.94% p.a.
5.95% p.a.
$2,383
Principal & Interest
Variable
$0
$0
90%
5.95% p.a.
5.95% p.a.
$2,385
Principal & Interest
Variable
$0
$0
90%
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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