A lot more people are looking to work for themselves as someone self-employed rather than working for someone else. It comes with a lot of advantages, you only have yourself to answer to, you have more control over what you do and what image you present and the hours you work and more. A larger proportion of Australia’s workforce is classed as self-employed than many realise. But one thing you have to prepare for if you want to take out a mortgage and buy a home is that there are different requirements for home loans for self-employed individuals. There are specialist loans and they involved basically providing more paperwork and proof of earnings. Here is a closer look.
Why is it harder to get a mortgage?
People who work for someone will find it is easier to get a mortgage than those who are self-employed and that is true in a number of ways. The big hassle is the amount of paperwork you need to supply when self-employed to prove you have an income that is reliable enough so that you are not too much of a risk for the bank to lend you the money. That is why more people turn to a self-employed mortgage specialist to help them get through the process, fill out the right paperwork and have everything needed so that their loan can be approved.
If you are not applying for a specialist loan it might be possible to get approval on a regular mortgage if you can provide at least three years’ worth of documents and accounts that prove you have a good profit and income. However for any new self-employed people wanting to buy a home this is not possible, they just have not been in business long enough. There can also be issues where accountants may have taken advantage of certain tax mitigations that make it look like you earn less than you did. This is good for when you want to pay fewer taxes but not good when you need to show you are safe to lend to.
Specialised mortgages
That is why in recent years specialised mortgages for the self-employed Australian have been created. These home loans are called self-certification mortgages and they are a chance for the self-employed Australian to still keep that dream of owning their own home and getting a home loans for self-employed individuals. Essentially these options mean the borrower does not have to supply all the proof and the paperwork otherwise required for other loans, and would work if you have been self-employed for only a couple of years or less. Instead of needing to provide pay slips, accounts with proof of income and all of that, you have to declare what your income is on the form and basically, you are making a sworn statement that this is an honest figure.
Always be honest as exaggerating or lying could get you into a lot of legal and financial trouble. Only borrow what you are certain you can repay. Talk to a self-employed mortgage specialist for excellent guidance.
