Do you work for yourself? Many Australians are now choosing to work for themselves and start their own businesses. The attraction of being their own boss and balancing their time between work and family are probably the main reasons why everyday Australians are quitting their jobs to become business owners.

There are many perks to working for yourself but there are also downsides, such as potential difficulty in securing a loan. Banks can be hesitant to provide loans to self-employed people due to income fluctuations and perceived instability.

Are you a builder, plumber, electrician or an information technology contractor but not sure if you are qualified for a home loan? Lenders have a different way of assessing the income of self-employed applicants.

As a self-employed person, you can be classified as a full-doc applicant or a low-doc applicant. A Full Doc applicant will have had their ABN for the last two years with their income registered for GST. Income required to service the loan will be based on the income declared in the two years’ tax returns. If the difference in income in the last two years is greater than 20%, then most lenders will consider the smaller of the two and if the difference is less than 20%, then assessment of income will be based on the average of the last two years. These statements give the lender insight into your business’ turnover and helps them to work out how much can be borrowed based on your income.

A Lo Doc applicant is unable to provide full financial statements or tax returns to confirm their income. Some lenders will only require an accountant’s declaration with regards to your income if full financial statement is not available. Minimum requirements for Lo Doc applicants are 12 months business activity statements (BAS), minimum of one year as a self-employed person and possibly six months’ worth of bank statements. The only downside to Lo Doc is the higher interest rate it attracts and the loan to value ratio required at 60% minimum. Above 60% and you will be paying loan mortgage insurance up to 80%.

Tips to increase your chances of getting a home loan

  • Save at least the 20% deposit by saving more during prosperous months
  • Have the Australian Business Number trading for more than two years
  • Speak to a broker who can advise you how much income you need to get the loan
  • Keep your paperwork such as your personal and company tax returns and notice of assessment in order

By knowing what to expect and what you will need when applying for a self-employed loan, what can be a challenging process becomes a lot easier. A mortgage broker understands tax returns and will help you maximise the loan amount you can borrow and find the right lender based on your situation.

This article is for general information only and should not be considered personal financial advice. Before making a financial decision, you should seek independent advice from a mortgage broker, financial planner or an accountant.

Maria Papa is a senior finance expert specialising in home loans, investment loans, self-employed loans, Lo Doc loans, car loans, personal loans and loan protection. She has offices in Sydney and Melbourne. If you have questions, you can call Maria at 0430 144 008 or email her at

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