Home loans for the self-employed

Do you often think getting a home loan is more difficult because you work for yourself?

It is often thought that if you’re an employee that you’re at a higher level than if you’re self-employed. There are differences, but there are so many benefits to being self-employed.

Being self-employed helps in 3 ways:

  1. Your wage which you pay yourself from your company plus the profits you make can be used to determine your borrowing capacity
  2. Addbacks – there are non-cash deductions which you can add back to the loan and be used as income. For example, if you have depreciation of $50K and $50K of net profit – we can actually use $100K as income. There are also addbacks like interest or additional superannuation that was paid which we can use as income.
  3. This one is my favourite, let’s say we’ve just finished the financial year I.e. its July and you are finalising your tax returns. These tax returns can be used for the next 18 months. This means if you haven’t found a property and 6-12 months past, you can rest assured that the lender will still rely on your historic tax returns.

Compare this to an employee, the bank relies on your most recent pay slip usually within 30 days. If you put a deposit down on a property then lost your job or had a pay cut, then your borrowing capacity would be affected straight away. BUT for a self-employed applicant, we can rely on historic tax returns. How good and “safe” is that?

At Loan Lounge, we have SME specialist that can assist you when it comes time to applying for a loan.

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