How to apply for a home loan if you’re self-employed

What you'll learn

• Who is considered a self-employed borrower
• Why a self-employed home loan application is different
• Documents you’ll need as a self-employed borrower
• How the application process and fast track assessment process work
• Things to consider when thinking about applying for a self-employed home loan

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.

Who is considered a self-employed borrower? 

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:

• are a non-PAYE taxpayer
• are the primary decision-maker of the business
• have direct control over the work you do, hours you work and who you employ
• are independent of external controls
• contributes all or most of the operating capital

Examples of self-employed borrowers include:

• sole traders
• any person in a partnership
• business owners
• some tradespeople
• a person who operates their business from home

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.

Home loans for self-employed borrowers vs salary-earners 

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.

Documents you’ll need as a self-employed borrower

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.

Document checklist 

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:

• Last 2 years’ personal tax returns, as well as your latest ATO notice of assessment.

Business partnerships, companies and trusts:

• Personal tax returns, supported by each year’s ATO notice of assessment
• Business, company or trust returns 
• Financial statements (including profit and loss statements, and balance sheets) 

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. 

What is a low doc home loan?

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:

• A signed Borrower’s Income Declaration stating your usual income
• Your registered business name
• Your Australian Business Number (ABN)
• Your Business Activity Statements (BAS) for the last 12 months
• You may need to confirm that you have been registered for GST for at least 12 months

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.

Application process

At Westpac, we assess your home loan application using the same process as salary-earners, taking into account things like:

• financial and income statements 
• savings history
• outstanding loans or debt (car or personal loans, prior home loans, credit cards)
• existing assets (real estate, vehicles, investments, superannuation)
• loan amount and serviceability
• your deposit (based on the property value and loan-to-value ratio)
• whether you need Lenders Mortgage Insurance (LMI) to top up your deposit

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.

Fast Track Assessment Process 

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:

• are self-employed 
• have a 20% deposit saved 
• can provide the last 2 years of personal notice of assessment from the ATO 
• pay yourself a salary from the business or receive distributions from your partnership or trust 
• won't need to rely on any other sources of income to afford your home loan repayments

Things to consider when thinking about applying for a self-employed home loan

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.

Ready to apply?

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.