The rules haven’t changed drastically for self-employed borrowers, however, lenders are requesting additional income documentation to ensure your business hasn’t been impacted by COVID-19.
What documents do I need to provide?
The requested documents may differ from lender to lender. Here is the list of documents that can assist you to speed up your loan process.
- The last two years financials including your personal returns, company returns, business profit and loss statements and financial statements.
- A Business Activity Statement (BAS) with periods of the most recent financial statements to application date. This should include the March 2020 quarter as well.
- Business bank statements from 1 March 2020 onwards. The bank statements need to show deposits evidencing consistent trading income. The statement must be no older than 14 days at the time of submitting the application.
- An accountant prepared business projecting for the next 12 months The accountant letterhead or cover letter should have information on projected revenue, projected operating expenses and projected net profit.
A handful of lenders in our panel allow the use of 2019 financials if servicing can’t be demonstrated using the most recent financials.
Major changes in home loan policies for self-employed borrowers
To reflect the impact of the restrictions due to the COVID-19 pandemic has had on self-employed Australians, many lenders are restricting the maximum amount they can borrow to 80% of the property value. This policy change affects both self-employed owner-occupier and investment home loans.
However, please note that there are plenty of other lenders who can still consider higher LVR (loan to value ratio) loans.
In addition, a few lenders now require you to prepare a COVID-19 impact statement where you’re required to outline:
- The effect of the COVID-19 (Coronavirus) on your business.
- What contingency plans do you have?
- How will you manage existing fixed business costs from your current cash flow?
- What level of cash reserves do you have to meet wages and loan repayments?
Our mortgage brokers can help you prepare a COVID-19 impact statement which is the key to getting approved as a self-employed borrower.
Call us on 1300 889 743 or fill in our online assessment form to speak with one of our specialist mortgage brokers who specialise in self-employed home loans.
How much can I borrow?
- Self employed borrowers can borrow up to 90% of the property value. However, with some lenders, you might only be able to borrow up to 80% of the property value.
- Higher loan to value ratio (LVR) loans will only considered on a case by case basis.
Please talk to our mortgage brokers for more details on how much you can borrow. You can call us at 1300 889 743 or fill in our free assessment form.
What industries may not be considered?
Some lenders have temporarily placed a ban on certain industries that were affected by the coronavirus the most such as:
However, if you can provide a detailed explanation of consistency in income, along with the latest 3 months bank trading statements, annualised turnover and ensure the business is trading at the same level as the previous financial year, we might be able to help.
Please call us on 1300 889 743 or fill in our free assessment form. Our mortgage brokers will find you a tailored solution.
Are low doc options still available for self employed borrowers?
Yes, low doc home loan options are open still for self employed borrowers even amidst the COVID-19 pandemic.
However, due to the pandemic, some lenders have made a few adjustments in lending policy like limiting maximum loan to value ratio (LVR), reducing maximum loan size, etc.
How to improve chances of approval?
Lenders will ask you more questions on the impact of the coronavirus pandemic on your business.
- What is the nature of the business?
- What is your business structure?
- How has your business been affected by the coronavirus pandemic? To what extent has it been affected?
- Has your role in the business been affected? If yes, to what extent?
- Is your business planning to or is currently receiving any government assistance due to COVID-19?
- What type of loan are you applying for?
- Has your income position changed since the time of application?
- Do you expect any reduction in income in the future?
- Do you have plans to continue to meet your loan repayment obligations through this crisis?
The answers to these questions are mitigating factors of your risk as a borrower and improve your chances of home loan approval.
What are some tips to get approved as a self-employed borrower?
- Make sure your business is not adversely affected by COVID-19.
- Have detailed business plans on how you are planning to sustain the business even during the pandemic.
- Lodge BAS if you have not done it.
- Make sure there is revenue flowing in your business banking statements.
- Provide as much information as you can to your broker.
Are you self employed and looking for a home loan?
Our mortgage brokers are experts at understanding the lending criteria and policies of banks and non-bank lenders who cater to self employed borrowers.
They are up-to-date with the latest lending policy changes for self employed borrowers due to COVID-19.
Call us at 1300 889 743 or fill in our free assessment form. We are working safely from home and are happy to help you.