If you are Self Employed – here is an easier way to get a home loan.

If you work for yourself, you know the sense of achievement that can come with building your business from the ground up.

Many self-employed people are fantastic with money, and able to juggle a wide variety of demands on their time and their budget. In spite of this, they often find it very difficult to obtain a home loan.

The unfortunate dilemma facing self-employed borrowers is – how to demonstrate income using traditional means.

Accountants will help you find ways to reduce your taxable income when you work for yourself – which is not just acceptable but often essential if your business is to survive in our complex taxation system.

Depreciating assets such as equipment and vehicles, incorporating as many costs as possible into the business expenses and allocating some payments to a spouse are all ways that businesses try to minimise their tax liabilities.

But the downside of this strategy is – if you make the income disappear, you can’t bring it back again when you try to apply for a home loan.

As a result, many self-employed borrowers aren’t able to qualify for a traditional loan.

The solution to this problem is a loan that was created with self-employed borrowers in mind – the Low-Doc loan.

Low doc means that there is a low amount of documentation required, compared with other lending methods. Usually you can use your quarterly BAS statements and bank records to help demonstrate your income – which is also useful if you’re not up to date with income tax returns.

This option isn’t for everyone though. You will usually pay a higher interest rate for one of these loans because the lenders still view self-employed borrowers as a higher risk.

Generally you can’t borrow more than 80% of the property value – which means that on a purchase price of $400k, you would need a deposit of $80k just to start the conversation. On top of that, you usually have to pay all of the upfront costs associated with purchasing the property, such as stamp duties and legal fees.

There are some very strict conditions that lenders require when offering Low-Doc loans, but if you have struggled to get a traditional loan due to being self-employed, this could be the solution for you.