Going To Your Bank Is the Death Of Your Self-Employed Home Loan (And Why A Broker Can Get You Approved!)
Self-Employed?
Why You're Unlikely to Get Approved Going Direct To The Bank (And 5 tricks to getting around it)!
If you’re reading article, chances are you’ve experienced the terrible service and lack of ability for a lender to get your home loan approved if you’re self-employed.
Problem is they only have their strict policy, which of course doesn’t suit your business. So you go to the next bank which has a different policy…and of course theirs is just as strict but with a slight twist. Now you’re notching up the third mark on your credit rating belt only to be told “you simply don’t fit the policy”. So you give up for a while, claim you’ll try again when the business is doing better. House prices jump and now you're screwed! You thought you were doing the right thing minimising your earnings, so you pay less tax. Now you’re sunk because the lender says, “you’re just not earning enough”. Doesn’t have to be that way! A broker can look at what you DO have and move you towards options that will accept where you’re at. Yep…it’s true.
Don’t listen to the noise. There are loans for self-employed with 6 month ABN’s and prior bankrupts all the way to full doc loans. Rolling the dice, hoping your lender policy magically favours your situation is simply Madness!
5 Reasons Your Bank is Killing Your Home Loan Dream (and why they’ll never get you a home loan)
So if you’re ready to stop making excuses and get your home loan set, I’ll show you 5 ways you can get approved as a self-employed person.
Forget everything you’ve been told by your lazy lender.
Most of the time you’ll pay the same interest rate as a normal PAYG employee.
Yes, really!
There are times where you’ll need a “specialist product” for a year or two until you meet the prime criteria. This will incur a higher rate in the interim.
- Forget Full Financials, just show 2 Notice of Assessments!
- Did your bank tell you there are lenders like Suncorp that can use the last two years Notice of Assessments to prove your income? And that you don’t need to show full financials? Or expense your business debts? No…really…of course they didn’t! If you’ve earned money through multiple sources including rental income it will show here and this is all that’s used to assess your loan.
- What if your Notice of Assessments doesn’t give you enough borrowing capacity? Then we’ll try another way! I’m just getting warmed up here! Remember it’s all about using what you DO have to find the right lender for you. Forget everything you think you know about how a self-employed home loan works.
- Pay slips Method:
- Do you pay yourself a wage as a business owner? Have you done it consistently for 6 months? Can you produce a payslip to verify? BANG! Lenders like Advantedge can assess your income straight from the payslip!
- No expensing company debts etc.
- Salary Credits Method:
- Pay yourself a wage, but don’t have a payslip? No worries, send your broker 6 months transaction bank statements where you get paid and they can use this as your salary. Plenty of lenders accept this like Ubank for instance.
- Full Doc
- Did your accountant show you how to pay nearly no tax by ramping up your expenses etc.? That’s great! There are plenty of lenders that will let you ADD-BACK some of these expenses such as depreciation, interest, and director salaries that you paid yourself. A company showing a small profit instantly becomes the money generating machine you know your business to be! Show it to a broker – don’t take your banks word for it! Remember, your bank is looking for the low hanging fruit. Your broker is hungry to find you a loan – that’s how they get paid!
- More on Add-backs later (if you can stay awake...).
- Macquarie is good here.
- ANZ are better if you only have 12 months financials to show (as one year didn’t perform so well).
- Low Doc:
- Plenty of business owners haven’t had time to get their taxes done. Don’t listen to your bank telling you to go away and come back with two years’ worth of financials.
- Listen to your broker – simply ask your accountant for a letter verifying what he expects your business to make once the tax returns are done, and presto! – that can be used as your income.
- There are plenty of non-bank lenders like Resimac and Liberty who are eager to lend to you in this way. Yes, you’ll pay about 0.5% more in interest, however it’s just for a few years until you get your financials sorted!
Reasons you need a broker:
- If what I’ve told you already doesn’t convince you then I don’t know what would.
- A good broker can see what you DO have to compensate what you DON’T have.
- We know where to send you if there’s a deal to be done!
Why Some Banks aren't always your best option for Self-employed Loans (and how to protect yourself!)
They Simply don’t get it!
- Some business and complex trust structures are assessed by the banks revolving door of disinterested university grads that simply want the “tick n flick” deals. They aren’t really compensated whether they decline your loan or pass it. They won’t work hard to get it over the line. They have a glut of low hanging fruit and just move onto the next application. They got 99 problems but finding new customers ain’t one!
- A broker is like an attack dog that keeps barking until the deal is set and you’re approved. A broker is all about getting paid to get you a home loan.
They Double Expense Everything!
- Your net profit accounts for your business car and asset finance loans. Your mainstream lender usually makes you expense them again. Double dipping is what kills your chances of approval success.
- Most lenders make you add car costs to your monthly living expenses, even if your business has a company car…madness! Some lenders don’t do this, and if it’s a matter of needing more borrowing capacity, so you can buy a house for your family, then that’s where your broker will send you.
Procrastination!
- 9-5 sluggards with no get up and go. They’re paid for their time, not their effort or results.
- If your loan takes some mental acuity to assess, then bank staff seem to procrastinate with your application. Your broker will bark and kick and cry until it’s assessed. Don’t go this alone direct with your lender!
Lenders see Self-Employed As Higher Risk (but will lend to you if presented like a BOSS!)
Most lenders see self-employed income as less stable. Probably some truth to that. Some lenders favour accounting firms over construction companies. Others love medical businesses over engineering.
It’s horses for courses…
Knowing that lenders think like this, simply find the lender that loves your industry!
Your broker can help!
What Is An “add back”?
By adding back some of your allowable expenses, a broker can increase your borrowing capacity.
And that’s exactly why we do it!
Some lenders are okay with it.
Others make it difficult…
Let’s have a look at the main ones – I’ll try not to bore you to tears!
- Depreciation
- Instant Asset write-off
- Additional superannuation
- Net Profit Before Tax
- One off expenses
- Interest expenses
- Rental property expenses
- Company car
- Trust distributions
Apply For A Home Loan!
If you would like a free assessment from a self-employed specialist broker, then book an appointment via this link: