The Self Employed Borrower
Unlike a PAYG employee who generally only have to provide a couple of pay slips a self-employed borrower has to provide more detailed paper work. This includes up to date tax returns and business financials for at least for 2 full financial years, although there are a couple of lenders who will accept one year financials.
But not all SME’s can provide up to date tax returns, all is not lost.
Some lenders allow for this (these loans are called Low Doc or Reduced Documentation Loans) where an alternative form of documentation is accepted. This could be bank trading account statements, BAS statements, financial cash flow projections, self-income declaration or a letter from the applicant’s accountant.
Lenders will have their own formula to determine the income you declare by working out an income level based on your turnover and the industry that your business functions in.
Lenders will have lower Loan to Valuation Ratio (LVRs), generally the maximum is 80% (though there are potentially higher LVRs) and certain mortgage insurance costs.
The above requirements generally apply to purchasing residential property and to a lesser extent to buying commercial property.