I went from PAYG to Self-employed and need a cashout to expand the business

Any general questions you might have in regards to loans and finance.
Andrew W
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Joined: Mon Jun 17, 2019 6:42 pm

I went from PAYG to Self-employed and need a cashout to expand the business

Postby Andrew W » Mon Jun 17, 2019 6:43 pm

I’ve been a hobbyist bee farmer for a while, and have only since last year registered my ABN, complied with food safety laws and have gone fully commercial. My business turnover over has been $70,400 so far. I wish to refinance my home loan to cash out some equity in the property to purchase more beehives. The property currently doesn’t have a mortgage. It is a 50-acre rural property and is valued at $470,000. The problem is I left my PAYG job to pursue this full time. I’ve heard of low doc loans. Is that a viable option for me?

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Otto Dargan
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Re: I went from PAYG to Self-employed and need a cashout to expand the business

Postby Otto Dargan » Mon Jun 17, 2019 6:59 pm

Hello Andrew W. Welcome to the forums.

Yes, for borrowers who’ve just started their business and can’t provide 2 years financials to prove their new self-employed income, a low doc home loan is a great option. For low doc cashout or equity releases lenders typically require proof of how the funds will be used if any money is released directly to the borrower. Lenders are concerned that the borrower may not actually have an income and is using the money to make the repayments or that equity is being released to be used as a deposit to buy further properties.

Each lender has its own requirement and accepts different document types to verify your income. These include:

With a low doc loan, you can:
  • Borrow up to 60% of the property value with standard home loan interest rates.
  • Borrow up to 80% of the property value with competitive interest rates ( a risk fee may apply).
  • Borrow up to 90% of the property value with one of our lenders (higher interest rates and risk fees apply).

We specialise in low doc home loans.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a low doc mortgage.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Andrew W
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Joined: Mon Jun 17, 2019 6:42 pm

Re: I went from PAYG to Self-employed and need a cashout to expand the business

Postby Andrew W » Mon Jun 17, 2019 7:41 pm

Yeah, sounds about right. So, what sort of proof do the lenders accept as evidence for a low doc cashout?

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Otto Dargan
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Re: I went from PAYG to Self-employed and need a cashout to expand the business

Postby Otto Dargan » Mon Jun 17, 2019 7:56 pm

Hi Andrew W,

If you’re releasing up to 60% of the property value in equity with a low doc home loan, the lenders only require a stated purpose as long as it’s acceptable to the bank. Some banks and lenders are more conservative and will require a letter from a financial planner or accountant if you’re releasing more equity than that. You can find a template of a letter confirming cash out purpose.

In some cases, the lender may ask for a full financial plan or a statutory declaration from the borrower confirming the loan purpose.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Andrew W
Posts: 3
Joined: Mon Jun 17, 2019 6:42 pm

Re: I went from PAYG to Self-employed and need a cashout to expand the business

Postby Andrew W » Mon Jun 17, 2019 9:06 pm

I can only provide my last two-quarters' BAS statements and I can have my accountant draft me a letter. Is there an acceptable default format that I can forward to my accountant?

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Otto Dargan
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Re: I went from PAYG to Self-employed and need a cashout to expand the business

Postby Otto Dargan » Mon Jun 17, 2019 9:20 pm

Hi Andrew W,

As an alternative to Business Activity Statements (BAS), some lenders will accept an accountant’s letter instead. This letter acts as a guarantee of the accountant’s knowledge of your circumstances at the specified date. Please note that the declaration is only valid for 60 days from the date mentioned.


The following details are normally required on the accountant’s letter:
  • The declaration must be signed by a fully qualified accountant who can confirm that your annual net income is true and correct.
  • Must be on the accountant’s letterhead. If it is a low doc declaration, the banks have specific forms for the accountant to complete instead of a letter.
  • Must show the accountant’s full details including ABN, address and phone number.
  • The letter must be signed and dated.
  • The accountant should specify how long he/she has acted on behalf of the borrower.
  • The accountant should also mention that the current financials are not available, but based on their knowledge of the client’s current circumstances, the figure is not an unreasonable estimation of their annual gross income.
  • The taxable income the borrower is earning.
  • A disclaimer to protect the accountant.


Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a low doc equity loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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