Working for yourself with an ABN
Business must have an ABN registered for at least 2 years, but some lender will consider even 1 year or less. In these cases, different conditions might be applied.
Most lenders offer home loan only to people who are self-employed for at least two years. However, some specialised lender might consider shorter periods, but in this case lender might apply different conditions to the loan as the loan carry an higher risk:
- higher interest rate,
- larger deposit requirement,
- borrowing a smaller percentage of the property value (usually 60% but some lender more)
- LMI (Lender’s Mortgage Insurance) applicable before the traditional borrowing limits (above 60% of the property value might start to be applied).
Lenders request to self-employed people their recent tax returns and financial statements, but they might not be ready yet. Also, the figures are assessed in a different way from different lenders:
- the lowest of the income figures for the last two years,
- the most recent one,
- the average of the two.
- Add back expenses might be used to correct the income (lender discretion)
Some self-employed people might not have their recent tax return and financial statements ready yet: some specialised lend accept alternative documentation to prove the income. For instance, the main documents that can be used to verify the income are:
- letter of the account stating income,
- Business Activity Statements (BAS) proving turnover,
- bank statements proving your turnover,
- old tax returns,
- interim financial statements.