Traditionally, obtaining a home loan for a self-employed is much more complicated than a standard PAYG as more paperwork is involved. For example, if you are a PAYG, some banks would only accept the 1 x payslip as a method of verification for income.
In addition, business owners can claim a lot more expenses (if it is deemed for business use) than PAYG employees. However, minimizing your taxes by applying maximum deduction will reduce your net profit margin in the business. Business owners need to understand that financiers focus on the bottom line instead of the top line- revenue.
Getting a home loan as a self-employed may require more preparation than someone a company employs. The tip here is definitely to engage a broker early in the pierce. Here are a few tips to help you navigate the process:
As a self-employed individual, you’ll need to provide more documentation compared to traditional employees including tax returns, profit and loss and ATO tax portals. Make sure that you are up to date with all your financials record.
Be vigilant in ensuring that you have a good credit score and history. One way to ensure that you have good credit score, and history is to subscribe to VEDA Advantage and for a modest monthly fee, you can track your credit score and history.
In additional make sure that you make all your repayments on time which includes all personal loans, mortgage, car loans and credit cards. Any delay in payments could jeopardize your credit history.
Lenders prefer to see a stable and consistent income when assessing home loans. Try and ensure that your business’s business is consistent and shows a track record of steady earnings over a period. If the income is fluctuating or is seasonal, be ready and prepared to explain to the financier about the income.
Make sure that you engage a broker who is familiar with and understands businesses. A mortgage broker who understands businesses is worth its weight in gold. This is important given a sound finance broker can interpret financials and to present a case to the financier of your true financial situation.
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