If you're a self-employed borrower or you own a small business, you are already familiar with the ongoing challenges of keeping your accounts, finances and income flow all on track. It's not easy.
But here's some good news. Getting a home loan doesn’t have to be yet another financial issue to worry about. Here are four steps that every self-employed borrower can take to help prepare for the home loan process.
1. Know your numbers: And the different ways they show up
When lenders are assessing a home loan application, they generally look for a steady level of income that shows them you are able to make your mortgage repayments. Start by showing the paperwork that tells them that you have been self-employed for a consistent amount of time and that you earn a regular amount each month. Being able to show these things will work in your favour.
At Pepper Money we understand that it’s sometimes challenging to provide all the paperwork necessary to document your income. Our alternative documentation home loan (Alt Doc for short) is designed to meet the unique needs of self-employed or small business owners who can't provide the same income documentation required by traditional lenders and mortgage insurers.
When we assess an 'Alt Doc' application some of the things we look for are:
- Has your business been ABN registered for at least 6 months?
- Has your business been GST registered for at least 6 months?
- Business Activity Statements (BAS)
- Bank Account Statements
2. Fast track to your goals: Be up front with your lender
From the outset, it's really important to be upfront about what's been going on in your business. This is particularly essential if there are any large variations up or down in the taxable income shown on your annual financial statements from one year to the next. At Pepper Money we have experience with a range of borrowers who are self-employed and we’re familiar with assessing the particular cash flows of small businesses.
3. Tackle the taxable-income dilemma: Get the right help
One of the major challenges self-employed people and small business owners face is their taxable income. The thing to consider when you address this question for your business is how your financial statements will impact your borrowing options in the future. Talking to a financial adviser or tax professional about your goals when you work out your taxable income is an important step.
4. Improve your cash flow: Keep things on track
Making the most of your cash flow using a financial plan can be beneficial for people who are self-employed. Paying off any outstanding debts such as credit cards or personal loans will positively impact your cash flow, and potentially your credit score, which may also mean you'll qualify for a higher loan amount with some lenders.To get an idea of how much you can potentially borrow, why not try out borrowing power calculator here.
While these tips can assist with your planning for a home loan application in the future, there are many options for self-employed people who are looking to get a home loan but have not yet been successful.
If you’re having trouble because of your type of employment or because your income type doesn' tick the right boxes, talk to Pepper Money today on 13 73 77 to find out more about our self-employed home loans. Alternatively, leave an enquiry online or reach out to a Pepper Money accredited broker, they're there to help.
This article provides you with factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. Neither Pepper nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in this article. For information about whether a Pepper loan may be suitable for you, call Pepper on 13 73 77 or speak to an accredited Pepper Money broker.
All applications are subject to the credit provider’s credit assessment and loan eligibility criteria. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
©Pepper Money Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.