The real-life guide to Home Loans
for the Self-Employed
Estimated read time: 6 Minutes
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Alt Doc Loans | Tips to Qualify | Budgeting Tips
Running your own small business comes with a level of freedom and flexibility, but this can leave little time for figuring out how to get a home loan.
Lenders will scrutinise not only your personal circumstances, but also those of your business – which can be daunting. That’s why we’ve put together real-life guide to self-employed home loans, to help take the stress out of the mortgage process.
Who we could help
There are two main loan options for the self-employed: Full Doc and Alt Doc options. The Full Doc option requires standard documentation, usually including tax returns, financial statements, and other proof of income. An Alt Doc loan could be more beneficial for self-employed individuals who have a good credit history, but have alternative documentation to support their income.
Pepper Money’s Alt Doc option considers applications using documentation that’s more relevant to a small business owner’s circumstance. Typically, the longer you can prove regular income history for self-employment, the higher your chances of being approved for a mortgage. You could be eligible for an Alt Doc option with as little as 6 months ABN and GST registration.
You’ll need to provide evidence of:
- ABN registration for six months
- GST registration for six months
- A declaration of financial position plus one of the following: 6 months business bank statements (inclusive of the last one month) or six months business activity statements (BAS).
How are Alt Doc loans different to Low Doc loans?
Low Doc loans used to be a popular way to apply for a mortgage with minimal documentation, however responsible lending obligations include a requirement for lenders to assess whether a loan is suitable for a borrower. Low doc loans don't meet these responsible lending obligations.
Pepper Money's Alt Doc option meets responsible lending obligations and considers alternative documentation options compared to traditional home loans.
The power of the Alt Doc loan
The Alt Doc option could give you the power to help to buy your own home or invest in property. Refinancing a home loan to Pepper Money could also allow you to consolidate business debt, improve your cash flow by paying outstanding tax debts, or even obtain cash for business purposes. All loan applications are subject to Pepper Money’s credit assessment, eligibility criteria and lending limits.
Are banks making it hard to prove your income when you've successfully started your own business? Pepper Money's alt doc option is here to help. This option offers the flexibility to provide other documentation to prove your income and ability to repay your mortgage.
It's a great way for self-employed borrowers to purchase property after just six months of owning their own business. We've got a few hints and tips to take the stress out of applying for a home loan so you can focus on running your business.
The first thing you'll need to do is prove you can comfortably make your mortgage repayments. Without pay slips from a 9 to 5 employer, this is where it can be tricky.
However, Pepper Money's alt doc option makes this easier. Pepper Money's alt doc option allows you to do this by showing 6 months of ABN and GST registration along with relevant financial statements.
The next thing to consider is optimizing your cash flow. This could make your application more attractive to lenders. You can do this through reviewing your business's payment terms and inventory so you're not paying for what you don't need, like keeping more stock on hand than required.
The final thing you can do is look at your credit history and current credit exposure. Paying off outstanding debts and reducing your limit on any credit cards can help increase your borrowing power.
There's a bit of groundwork to do to get your application ready but once you do, getting a home loan when you're self-employed doesn't have to be difficult. If you need any more hints and tips for your home loan journey, then visit peppermoney.com.au. We're here to help.
Tip 1: Count on the numbers
One of the things lenders look for when assessing a home loan application is if you’ll be able to make regular mortgage repayments. When applying for a Pepper Money Alt Doc option, you’ll need to provide paperwork that demonstrates that you’ve been consistently self-employed for at least six months. You’ll also need to provide proof (invoices or other activity statements or bank statements) that you earn a regular amount each month, as well as ABN and GST registration.
It’s important for self-employed borrowers to prove a consistent level of income to the lenders when applying for a home loan.
Tip 2: Go with the cash flow
Pay off outstanding debts, including personal credit cards and loans
Control your inventory
Use a financial plan and forecast
You can’t always see what’s coming around the corner for your business. But a little forward thinking can keep you from being on the back foot when you apply for your loan. Track your cash flow on a monthly basis and compare where you are each month. This can help you forecast and see emerging patterns, such as seasonal demand. This can help you make better business decisions and predict cash flow problems before they happen. Also make sure you set aside money for GST and tax!
1. Set a goal for your home deposit
2. Keep good records
3. Put it away
4. When sales are good, savings are good
5. Look into income protection insurance
Hopefully you’ll never have to call upon your income protection insurance. But it could be a good idea to be prepared for a situation where you are unable to work due to injury or illness. With income protection insurance, you won’t have to dip into your home savings for daily expenses. Just remember to do thorough research before purchasing any insurance product ASIC's Money Smart website offers useful tips and information around income protection insurance.
Self-employed and having a hard time getting a
home loan?
Running your own small business comes with a level of freedom and flexibility, but this can leave little time for figuring out how to get a home loan. Our short video aims to answer some of the questions you may have around getting a home loan as a self-employed borrower.
We're here to help
When talking to a Pepper Money lending specialist, be up front about the ups and downs of your business. The little details matter. While consistent income is a factor when assessing an application, we've been helping small business owners with self-employed home loan options across Australia and New Zealand for more than 22 years. We’re dedicated to helping self-employed Aussies become homeowners and we understand the challenges facing small business, and how cash flow has a knock-on effect. As one of Australia’s largest, most-trusted non-bank lenders, we’re in the business of finding home loan solutions that fit your circumstances.
Taxable income can also be confusing for the self-employed. It could be a good idea to talk to a financial adviser or tax professional about how your taxable income could impact how much you can borrow for your loan. They might also be able to help you learn more about available tax deductions and explain how to best set aside money for tax throughout the financial year. Check out our self-employed home loan options and how we can help.
Contributor | Vasè Marcevska, Head of Direct Sales – Mortgages and Personal Loans
Vasè has over 16 years of experience in the Banking and Finance sector, specifically within the Third Party and Consumer lending industry. Her expertise now focuses on enhancing our Customer program through a deep understanding of mortgage origination and service excellence across our Financial products.
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Resources to help self-employed borrowers
Not sure if you can get a home loan while running your business? These great resources are here to help you get ahead.
Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
All applications for credit are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply.
The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.
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