How to buy a property when self-employed - low doc
Don’t let being self-employed stop you from buying your dream home or getting your investment property portfolio started.
As a self-employed borrower you may often face the challenge of not being able to present payslips and EOFY payment summaries to prove your income and support your loan application, but don’t let that deter you.
Many lenders offer loans for self-employed borrowers who don’t have these records. This means that, rather than the usual documentation, you prove your ability to service a loan using business bank statements, income declarations from your accountant, and other financial records. This is what we call a Low Doc Loan.
Of course, as with any mortgage application, you must still prove that your income exceeds your spending and that you can service the loan.
At SGB Finance, we have access to specialist lenders that assess applications on a case-by-case basis and who tailor their products to self-employed borrowers and contractors, while bank lenders do not.
It is important to know that loans to self-employed borrowers do differ from standard loans in a few ways, other than the application process.
Lenders offset the extra risk they are taking when lending to a self-employed borrower or contractor by charging slightly higher interest rates. Generally, you can expect an interest rate for such a loan to be one to two percentage points higher than for a full-documentation loan.
Lenders also have extra rules on Loan to Value Ratios (LVR) and insurance requirements (such as Lender’s Mortgage Insurance (LMI), and risk fees). Most lenders will also insist on an LVR of no more than 80 per cent – meaning that under no circumstances will they lend more than 80 per cent of the property value, as assessed by the lender.
In cases where the loan amount is for more than 60 per cent of the property’s value, some lenders also require self-employed borrowers to pay for LMI.
