More than 2 million Aussies are currently classified as self-employed, according to the World Bank. While there is little data to suggest that this number is increasing, market experts said the anecdotal proof is enough to signal a greater need for specialty lending amongst self-employed individuals Down Under.
Being self-employed offers flexibility and independence, but it can also make securing a home loan or a business loan more challenging. Traditional lenders often require stable income proof, which may be harder to demonstrate when running your own business. Fortunately, there are ways to improve your chances of approval, including working with alternative lenders who specialise in self-employed mortgages.
Here’s everything you need to know about getting a home loan when you’re self-employed in Australia.
1. Understand the Challenges of Getting a Home Loan When Self-Employed
Lenders assess risk before approving a mortgage, and self-employed applicants are considered higher risk due to fluctuating income and irregular financial records. Some common challenges include:
- Difficulty proving consistent income
- Strict documentation requirements
- Higher deposit requirements compared to PAYG employees
- Limited options with major banks
2. Essential Documents for Self-Employed Home Loans
To boost your chances of approval, prepare the necessary documentation, which typically includes:
- Tax returns (at least two years’ worth)
- Business financial statements (profit and loss, balance sheets)
- BAS (Business Activity Statements)
- Bank statements (personal and business)
- ABN and GST registration details (if applicable)
- Proof of ongoing work or contracts
Some lenders may offer loans with reduced documentation requirements, known as low doc loans, which are ideal for self-employed borrowers with strong cash flow but limited paperwork.
You can read a comprehensive list of docs you will need for a self-employed home loan here.
3. Alternative Lenders for Self-Employed Home Loans
If major banks reject your application, consider alternative lenders who specialise in self-employed borrowers. These lenders assess applications based on business performance and cash flow rather than strict income verification. Some well-known alternative lenders in Australia include:
1. Pepper Money
Pepper Money offers flexible self-employed home loan options, including low doc and full doc loans. They consider alternative forms of income proof and cater to borrowers with unique financial situations.
2. Liberty Financial
Liberty provides self-employed borrowers with tailored mortgage solutions, offering low doc loans with flexible income verification requirements.
3. Bluestone
Bluestone specialises in self-employed home loans with minimal paperwork, allowing for alternative documentation such as bank statements and accountant declarations.
4. Resimac
Resimac offers competitive self-employed mortgage products, including non-conforming loans for those who may not meet traditional lender criteria.
5. Firstmac
Firstmac provides self-employed home loans with flexible income verification, including low doc and alternative income options.
This is just a small selection of non-bank lenders from our panel of over 80 lenders, so reach out to us to help you find the right lender to suit your situation.
4. Improve Your Chances of Home Loan Approval
To strengthen your mortgage application as a self-employed borrower:
- Maintain clean and organised financial records: Ensure tax returns and business statements are up to date.
- Save for a larger deposit: A higher deposit (e.g. 20%) reduces risk for lenders.
- Reduce personal and business debt: Lowering liabilities improves your debt-to-income ratio.
- Improve your credit score: Paying bills on time and reducing outstanding debts can increase approval chances.
- Work with a mortgage broker: A broker can connect you with the best lenders for self-employed applicants and streamline the process.
5. Consider Low Doc Loans
Low doc (low documentation) loans are designed for self-employed borrowers who lack traditional income proof but have a strong financial position. These loans typically require:
- Business bank statements (e.g., six to twelve months)
- An accountant’s letter confirming income
- BAS statements
Low doc loans often have slightly higher interest rates but offer more flexibility for self-employed applicants.
6. Final Thoughts
Getting a home loan when you’re self-employed in Australia requires careful planning, strong financial documentation, and possibly seeking out alternative lenders. While major banks have strict lending policies, alternative lenders provide more flexible solutions for self-employed borrowers. By preparing the right documents, improving financial health, and considering low doc loan options, you can successfully secure a mortgage and achieve homeownership.If you’re self-employed and looking for the right mortgage, speaking to a specialist mortgage broker can help you find the best loan options tailored to your unique circumstances.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute financial or professional advice. While we strive to provide accurate and up-to-date information, mortgage laws and regulations can change, and individual circumstances may vary. We recommend consulting with a qualified financial advisor or mortgage broker to assess your specific situation and needs. Base Home Loans is not responsible for any actions taken based on the content of this blog. Always conduct your own research and consider seeking professional advice before making financial decisions.
