Bloom Home Loans –
Your Experienced Mortgage Brokers
for Self Employed

How Long Do I Need To Be Self-employed To Qualify For A Home Loan?

To get a self employed home loan, most lenders need to see that you have been self employed for at least two to three years. There are exceptions to this rule where some lenders consider people who have been self employed for only one year.

What if I’ve been self-employed for less than a year?

If you’ve been self-employed for less than one year your options a more limited. Most lenders may not consider an application because you don’t yet have tax returns to prove your income and because new businesses have more financial uncertainty.

We have lenders who can look at your income from your last job and take that as proof that you can afford the loan.

The reasoning behind this is that if you decided to close your business you could always return to working for someone else on a similar salary. On that basis we can help you borrow up to 80% of the property value.

What if I’ve been self-employed for less than a year?

If you’ve been self-employed for less than one year your options a more limited. Most lenders may not consider an application because you don’t yet have tax returns to prove your income and because new businesses have more financial uncertainty.

We have lenders who can look at your income from your last job and take that as proof that you can afford the loan.

The reasoning behind this is that if you decided to close your business you could always return to working for someone else on a similar salary. On that basis we can help you borrow up to 80% of the property value.

What If I’ve Been Self-employed For One To Two Years?

We are accredited with some lenders who can approve loans for people who have been self employed for between one and two years as long as they have been in the same line of work for some time and have at least one year’s financials for the new business.

A good example of someone we can help would be an Electrician with their own business, who has been operating one year, who was previously employed as an Electrician for five years.

Mortgage Brokers
Home Loan Specialists

What Mistakes Do Banks Often Make?

We often see mistakes in the way that the banks calculate the income for self-employed borrowers.

For complex loans, we make extensive notes, and if need be, call the assessor and walk them through the financials to ensure that they assess the loan correctly.

The most common mistakes we see are:
Lack of understanding: Complex trust structures with multiple companies and trusts are often handled by bank staff that lack the experience to understand what’s happening with your income or if you’re using income protection payments. In these cases, we’d talk to your accountant and then speak to the assessor to ensure they understand exactly what’s going on.

Double-dipping: This is where the lender takes an income into account twice (e.g. Net Profit Before Tax and accepts the dividend paid to a director) or takes an expense into account twice (e.g. forgetting to add back interest on loans).

Company car: Lenders regularly ignore the benefit a self employed person receives from tax deducting their car expenses in their company. We always draw their attention to this in our notes.

Procrastination: Technically, this isn’t an error as it’s done on purpose! If your loan is particularly complicated, we find that bank staff may take their time to get your application. We usually speak to management and ask them to assign your loan to an experienced assessor who will enjoy the challenge of a complicated application.

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How Do Lenders Calculate My Income?

Most lenders believe that by looking at your past tax returns, they can predict how stable your business will be in the future.

Banks and non-bank lenders alike tend to be very wary if you have an income that has increased or decreased by a large amount in the last two years.

  • One lender may use the lowest of the income figures for the last two years.
  • Another may use the most recent year’s income as shown on your tax return.
  • Some may even average the two years income or take 120% of the lowest year’s income.
  • They may or may not then add back expenses shown on your returns.
  • Some lenders accept your six month’s payslips and a letter from your accountant instead of providing tax returns and financials.

As you can imagine, this makes a big difference to your loan application! Importantly, every lender will interpret your tax returns in a different way and may look at your skills as an entrepreneur, your experience in the industry and the risk profile of your industry to determine how to assess your income.

Nearly 70% of all new home loans are now
done with a mortgage broker.

There are many reasons for this. The most important are that a Mortgage Broker is legally bound to operate in your Best Interests. Banks do not have this obligation.
Mortgage Brokers also offer you a choice. Banks are only able to offer you their products.

Depending on your situation, we may pick and choose which information to provide to help prove the highest possible income. If you can provide them, then we may ask for Business Activity Statements (BAS), An Australian Taxation Office (ATO) tax portal printout or bank account statements for the last three to six months showing your turnover.

We specialise in finding the lender that will look at your documents most favourably!

At Bloom we are here to help. It is our goal to help you achieve your dream with a home loan that doesn’t cost the Earth.

How we are paid

There is no cost for seeing a professional Mortgage Broker. The lender will pay the broker a commission for introducing the client to them.

Credit Scoring

Applying for finance is a big deal. Every application for credit will remain on your credit file for 5 years. Multiple applications for credit within a short period run the risk of shredding your credit score and making it more difficult to get finance.

We are close!

Bloom is your professional advocate as your Mortgage Broker specilaising in self employment. We are in your corner to get the right loan for you. We live in and know the area well. Let us support you.

faq
Mortgage Broker

FAQ

  • We specialise in obtaining approvals, not just pencil pushing.
  • We provide dedicated support to ensure your application progresses faster than most others in the industry.
  • Bloom Home Loans operates on a best interest duty, banks do not.
  • We offer Australia wide services.
  • A full member of MFAA and AFCA, we only enact the most ethical and fine tuned lending practices.

To put it simply, the lender’s maximum loan is normally between 5 – 7 times gross income. It is always important to consider what is the best way to present your income to a lender so that they will understand? Items such as personal loans, credit cards and HECS debt all have a very large impact on how much you can borrow. Depending upon your income some lenders are very strict on overtime, bonuses, commissions and self employed. Whereas others are far more lenient in these areas. We are experts in understanding each element which may affect your ability in obtaining credit.

Absolutely! We pride ourselves in knowing lender policies for our self employed clients. Some
lenders will offer prime rates will an ABN as little as 6 months old. Understanding your business and
then representing this in the right way to the right lender is very important. A good Accountant will
ensure you have tax effective income. A good Mortgage Broker will understand the good work your
accountant has done and then represent this to the bank in the right way to increase your borrowing
power.

Many years ago lenders needed you to have at least 20% deposit plus stamp duty to buy a home. As
living costs and home prices increased; they released this was an unrealistic hurdle. So they allowed
clients to have as little as 2% deposit but pay a one off insurance premium – Lenders Mortgage
Insurance (LMI). LMI protects the lender in the event you default on the loan but you pay the
premium. LMI is normally added to the home loan. Whilst it can be a significant cost, it enables you
to get into the market sooner

All lenders use independent third party valuers to assess the value if your home when a full on site
inspection is required. Normally this cost is picked up by the lender. Some lenders have their own
software to automatically determine the value of your home. Valuations between lenders vary
significantly. Sometimes more than 20%. If a valuation is required we will order this for you.

Rather than count yourself out of being able to get finance we recommend you contact us as you may be surprised what is possible. There are specialist lenders we have relationships with that will consider your loan application even with bad credit, defaults, ATO debt and bankruptcies.

Lenders look at your Capacity to repay the loan, your Capital / how much money you have, Collateral you are offering as security for the loan, Conditions including the economic environment, loan purpose and interest and your Character to ensure you are a responsible borrower and will repay the loan

Fixed rates are great if you are worried about what would happen when interest rates rise. Theyoffer certainty for a period of time but this certainty may come at a cost with higher interest rates. You will likely also be restricted from making additional repayments off your loan.

Variable rates enable you to pay as much off your home as you like without penalty. You can also access these payments again via redraw if you are ahead on your scheduled payments. If rates fall you will benefit whereas If they rise your loan payments will increase. It is possible to have a split loan, where a portion is Fixed and a portion Variable.

The best loan is the one that offers certainty of approval and meets your needs now and into the future. The lowest rate may not necessarily be the best fit. Whilst a low rate may be enticing now, if the bank policies mean you cannot access it or if the loan structure is not suitable then this may not be the best option for you

Yes. This is sometimes called “the bank of mum & dad”. Loans with no deposit may be possible if another property is offered as partial security to support the loan. It may not increase the amount you can borrow but it will reduce the risk to the lender and result in a lower interest rate. It will also save you having to pay Lenders Mortgage Insurance. It is not without risk though. The guarantors property is used to secure your loan If you default on your loan the bank may call upon the guarantor to pay the shortfall. Guarantor loans of this nature are limited but still present a risk.

If the loan term exceeds your expected working life the lender will want to know how you will pay the loan when you finish working. This is termed an exit strategy. There are various exit strategies that are considered by lenders. Some include downsizing to a smaller property after retirement, using superannuation to pay off the remaining loan or if it is an investment property you can sell it at any time

We save you time by preparing the loan application and presenting you to the most suitable lender in the best manner, request interest rate reductions on your loan, structure the loan, offer guidance on the benefit of making additional loan repayments and saving you time. When we say our home loans don’t cost the Earth, we mean it. Even a 0.50% interest difference on a $500,000 loan over 30
years will save you more than $55,000

Every lender is different. For our first meeting we recommend getting evidence of income, liabilities and ID. We will guide you on the specific requirements as we progress your application

We will make this clear once an application is lodged. Approval timeframes vary depending on the lender and complexity of your application. We monitor your application every day to ensure it never falls behind as we have seen is all too common in the industry.

We encourage you to reach out at any time! We have a passionate team ready to discuss your needs right away.

How do I start?

We encourage you to reach out at any time! We have a passionate team
ready to discuss your needs right away.

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