Financing for Self-Employed Borrowers
One of the best assets you can have is your ability to earn an income. It’s this earning power that gives banks the confidence to lend money to you. Once you’ve secured a loan, you can leverage that money to invest in property – a strategy that, when done right, is one of the most powerful ways to build long-term wealth and passive income for your future.
But if you’re self-employed, navigating the lending landscape can feel a bit more complex. The good news? It’s not impossible – and there are more options than ever for self-employed borrowers to get into the property market.
How Banks Assess Income
Typically, there are two ways that banks assess income:
PAYG (Pay As You Go): This is when your employer pays you a salary. You can show the bank your payslips, and they’ll use this to assess your borrowing capacity.
Self-Employed Income: If you’re self-employed, the process works a little differently. Banks often need to see detailed financials to assess your income – but that’s not always a straightforward process.
Here’s where it can get tricky for the self-employed. In many cases, your accountant’s main goal is tax minimisation. This means that while your accountant works hard to structure your finances to reduce your taxable income (which is great for lowering your tax bill), this can work against you when trying to secure a loan.
Why? Because banks look at your taxable income to determine your loan eligibility. So, less income on paper can translate to less borrowing power.
Why Lender Requirements Vary
Not all lenders assess self-employed income in the same way. Some may require more documentation and detailed financials, while others are more flexible, accepting alternative income verification. This is where partnering with a mortgage broker becomes crucial.
A broker can:
Help you identify which lenders offer more favourable terms for your particular financial situation.
Navigate the loan application process on your behalf, not only saving you time, but also ensuring that your borrowing potential is maximised.
Shifting Trends in Self-Employed Lending
Banks are increasingly recognising the unique nature of self-employed income, and they’re offering more flexible lending solutions than ever before. Here are some of the most common options available for self-employed borrowers:
Using Payslips: If you pay yourself a salary, some banks will accept your payslips as proof of income. This can be a great option because it means the bank won’t dig into your business financials – they won’t take business debts like car loans or equipment loans into account when assessing your borrowing capacity.
One Year’s Financials: Some banks no longer require two years of financial statements, which can be particularly beneficial if your business has been growing or was impacted by events like COVID. If 2022 wasn’t a strong year for your business, but 2023 is looking better, using only your most recent year of financials could improve your chances of securing finance.
Alt Doc Loans: Alternative documentation loans (Alt Doc) allow you to use different forms of income verification. Instead of full financials, banks might look at your BAS statements or business bank account records. This can be a simpler way to show your income and increase your chances of getting approved.
Why Partnering with a Broker Makes Sense
Navigating the home loan market as a self-employed borrower can be time-consuming and overwhelming. Different lenders have varying criteria, and figuring out which one is the best fit for you isn’t always straightforward. That’s why partnering with a mortgage broker can make all the difference.
We also understand the finer details of how different banks assess self-employed income.
Our experience in working with self-employed clients means we know how to present your application in the best possible light—whether that’s leveraging alternative documentation or matching you with the right lender who understands your financial structure.
Here’s What We Can Do For You
Access to 30+ Lenders: We have relationships with a wide variety of lenders, giving you access to loan options that might not be available directly to consumers.
Tailored Solutions: We understand that your situation is unique, and we work closely with your accountant to ensure that your finances are structured in a way that maximises your borrowing potential.
Expert Guidance: From the moment you contact us, we guide you every step of the way—whether it’s explaining your loan options, gathering the right documents, or negotiating the best terms on your behalf.
At Sandcastle Finance, we pride ourselves on helping self-employed clients grow their property portfolios and achieve their financial goals. We know the challenges you face, and we’re here to make the process as simple as possible.
Whether you’re looking to purchase, refinance, or simply explore your options, we’re here to help you every step of the way.
Book an appointment with us today, and let’s start building your future together.
Sally Prowse
Director
Ph: 0400 570 051
Email: sally@sandcastlefinance.com.au
Camilla Bowhill
Finance Broker
Ph: 0403 852 733
Email: camilla@sandcastlefinance.com.au
Michelle Russell
Mortgage Broker, MFAA
Ph: 0493 994 160
Email: michelle@sandcastlefinance.com.au