Applying for a home loan when you’re self-employed might appear to be complex – but it doesn’t have to be. Whether you’re looking to get into the property market as a first home buyer, purchase your next home or kick start your investment portfolio, we’ll break down the process and offer some tips to give yourself the best chance of getting your loan approved.
Here, you’ll find out exactly what’s involved in applying for a home loan when you’re self-employed, as well as the additional documents required, how to set yourself up for success and some of the ways Westpac can help you get into your home sooner.
The first step is to understand if you fall into the category of being ‘self-employed.’ Lenders typically consider you as self-employed if you:
Examples of self-employed borrowers include:
Fall into one of those categories? Your lender may consider you to be self-employed – therefore the documents required to process your home loan may be a little different.
The question you might be asking is: What’s the difference between a standard home loan applicant and a self-employed borrower? And why do I need to go through a different process?
For most lenders, it generally comes down to risk. When you run your own business, your income isn’t always guaranteed, and you may not generate the same amount each month. Some lenders might consider your incomings to be unpredictable or irregular, which could mean that you’re at more of a risk of not meeting your loan repayments.
The key to giving yourself the best shot at a self-employed home loan is demonstrating to the lender that you’re a safe and reliable borrower, and you can afford to service the loan. When you’re self-employed, there are a few extra steps you need to take in order to do this – which generally involves providing more detailed information about your financial situation through additional documents.
Now that we know the main difference between the process for standard and self-employed home loan is additional financial documentation, let’s find out exactly what you need to provide as part of your application.
If you’re self-employed and want to apply for a home loan, you need to demonstrate evidence of your business’ financial position. Most lenders do this by looking at your past tax. Depending on whether you’re a sole trader, partnership or company, you’ll need to show different types of documents.
Sole traders, you’ll need:
Business partnerships, companies and trusts:
It’s also a good idea to have your tax-deductible expenses handy to include in your application as well. This might be things like interest repayments (if you have a business loan), rental property and one-off expenses, depreciation, asset write-offs, company car deductions and family trust distributions.
The more information and documentation you can provide the better – so being organised and maintaining records is key.
A low documentation home loan (otherwise known as a low doc home loan) is offered by some lenders to self-employed borrowers who may not be able to meet all documentation requirements of a regular home loan application.
Some documents that may be accepted instead of regular documentation include:
Low doc loans generally require a slightly lower loan to value ratio (LVR) than other borrowers, which may lead to you needing to put up a larger deposit or a higher amount of equity to qualify for the loan.
Note that Westpac no longer offers low doc loans – we offer the same loans to self-employed customers, but just require financial documents and ATO notices of assessment from over a longer period of time.
If you’ve recently started your own business and don’t yet have the documents you need to apply for a home loan, there may be other ways we can assess your application.
Reach out to your local Home Finance Manager to discuss your options – we’re always happy to help.
At Westpac, we assess your home loan application using the same process as salary-earners, taking into account things like:
The good news? You won’t be put on a higher interest rate just because you’re self-employed: your loan comes with the same rate, features and benefits as salary-earners.
In some cases, Westpac might be able to assess your application quicker if you're eligible for our Fast Track Assessment Process. Fast Track provides a way to apply for a home loan using only your last 2 years of ATO notice of assessment, rather than your business financials.
You may be eligible if you:
When applying for a self-employed home loan there are a few things you can do to make the process as seamless as possible.
Firstly, maintaining good financial records is a must. It’s always a good idea to have original copies of documents including past payslips, recent bank statements, tax returns and anything else that will help confirm your financial situation as a business owner. What matters most is that you can demonstrate consistent income, business growth and increased earnings over time.
If you use an accountant or tax professional to do you tax returns, tax minimisation for business owners is a common strategy they use. If this is the case for you, your taxable income may appear lower, and it may make it more difficult for you to get a home loan. It’s a good idea to chat to your accountant and make them aware of your intention to purchase a home in the next 12 months or so, therefore you may potentially the need to maximise your income for your home loan application.
We understand that applying for a home loan as a business owner can be overwhelming – but we’re here to help, every step of the way. For more information on how you can get into your home sooner, call us on 131 900 or visit a branch to chat to your local Home Finance Manager.
Make sure you understand how refinancing will affect your loan and work out all the costs, before you decide whether it’s the right move for you.
Use our home loan refinance calculator to see how much you may be able to save when you switch your home loan from another bank to us.
Calculate how much you could save by switching your home loan to Westpac - you could get same-day approval.
Conditions, credit criteria, fees and charges apply. Residential lending is not available for Non-Australian Resident borrowers.
This information has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and, if necessary, seek appropriate professional advice. This includes any tax consequences arising from any promotions for investors and customers should seek independent advice on any taxation matters.