Declined with Heritage Bank - Are there any lenders that can help a self-employed startup?

[Mustaine]

Hi, I went from a PAYG employee to self-employed recently. It’s a startup. I’m looking to move somewhere closer to our office and have found an ideal house. We approached Heritage for a mortgage but was advised by their LO that they don’t do low docs for self-employed borrowers. Which lenders can consider new business income (startup). What documents do I need for a home loan as a startup?

[Otto Dargan]

Hello Mustaine. Welcome to the forums.

Heritage Bank never really offered low doc loans; their focus has been on flexible fixed rate loans and discounted basic loans for full doc borrowers. However, with alternate or low-income verification, you can borrow up to 80% of the property with some of our lenders.

For brand new start-ups, an accountant prepared business plan, cash flow and profit projection can be considered by a couple of our lenders on a case by case basis. The maximum you can borrow is 70% of the property value.

To qualify for a low doc loan you’ll typically require the last 6 months Business/Personal Bank Statements plus your choice of:

• 2 quarters' Business Activity Statements (BAS) or;
• Completed accountant’s letter.

One of our lenders can consider using previous PAYG income if new self-employed in the same line of work. The point is there a few options out there we can consider after a full pre-assessment. They key is to apply with the right lender.

Speak with one of our specialist mortgage brokers today by giving us a call on 1300 889 743 or by filling in our free assessment form to discuss your situation.

Cheers,

[Mustaine]

I can provide the last 6 months BTS and BAS but the turnover is much lower than expected of the projected year-end income.
What information will they use to assess my income? I’m trying to determine how much will I be able to borrow?

[Otto Dargan]

Hi Mustaine,

Typically, when you use BAS as your income verification, most low doc lenders will use 40% of the turn over as your assessable income. However, depending on the type of industry you’re in, some lenders can use up to 70%-90% of the turn over specifically for service industry types i.e. sub-contractor/ home business.

Cheers,

[Mustaine]

Cool. A couple of final questions, why are interest rates higher for self-employed borrowers?
And what’s the best rate I can get as a low doc applicant?

[Otto Dargan]

Hi Mustaine,

Yes, low doc interest rates are generally higher than full doc loans. Lenders consider low docs as being a higher risk comparatively so they tend to charge a higher rate to offset that risk. Depending on your loan to value ratio (LVR) and the income verification documents you can provide, the interest rates you qualify for will vary.

Although you’ll be paying a higher interest rate initially, you can refinance out of a low doc into a full doc home loan when you owe less than 80% of the property value, are not on a fixed rate and can provide the following documents:

• 2 years’ personal tax returns
• 2 years’ personal notice of assessment (NOA).
• 2 years’ business tax returns (company/trust/partnership).
• 2 years’ financial statement if available.

Our post-settlement team will ensure that you’re on the best possible variable rate that you can qualify for by reviewing your home loan annually.

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 home loan.

Cheers,