Self-employed? What you need to know when applying for a home loan 

Saving for a deposit and applying for a home loan is tricky at the best of times, let alone when you’re juggling your own business.

But it doesn’t have to be a headache. With an abundance of self-employed buyers now in the market, there are an increasing number of options for business owners to secure a home loan.

Speaking with RAMS home loan guru Lionel Sexton, we get the lowdown on how to navigate the loan application process when you work for yourself.

The stats are on your side

Self-employed businesses have flourished over the last couple of years, which has increased the number of self-employed borrowers looking to buy a home.

In August 2021, the Australian Bureau of Statistics recorded that 7.8% of the employed population were self-employed, or independent contractors. The largest proportional increase from 2014 to 2021 in independent contractors was seen in media and communications, rising from 6% to 10%.

This major shift in the landscape has meant lenders have had to adapt. There are now many flexible options available for self-employed borrowers, making it just as simple as the traditional process for employees of the public and private sectors.

Consider your cash flow

It can be challenging to save for a deposit at the best of times, but if your pay cycles are a little irregular it can become even harder to keep track of your incomings and outgoings.

However, it’s precisely because of these irregularities that self-employed borrowers should be diligent about tracking their cash flow and expenses. Ask yourself, are my expenses fixed? Or do they vary from month to month? If you’re not already keeping a budget, start to think about whether starting one could help you track your expenses.

When you have saved up and it comes to crunch-time, it’s important to consider your financial needs and situation and how this will affect how much you should borrow

Apply your business smarts

Lionel Sexton, RAMS Franchise Principal for the Geelong region, says your first property purchase could be the most important and expensive decision you make – so “apply your business smarts”, he says.

“You wouldn’t rush an important business decision, so don’t rush this one,” Sexton advises.

“Research as many properties as you can. Search on realestate.com.au and speak to agents about what you are looking for until you build a nice database of information on properties in the location and style that is perfect for you.”

Ask what borrowing options are available

Self employed business owners now have a lot of borrowing options available to them. It’s as simple as getting in touch with a loan manager to ask about the best solutions for your situation.

“You might be surprised to learn that RAMS franchisees are self-employed business owners too,” says Lionel, “which means they understand how to navigate this process with you.”

Whether it’s a loan in your personal name, company name, partnership or trust, RAMS can help you.

“A fast-track loan may even help your family members help you with supporting property equity to reduce your Lenders Mortgage Insurance costs,” he advises.

Build a solid home loan team

Before applying for a home loan, business owners should aim to build a sound team around them.

Lionel advises to “plan early with your financial advisor, seek the right advice and consider what is right for you.”

“They can help you with the preparation of financials to help with funding applications, and advice on how best to structure the purchase including strategies on how to protect your home.”

Disclaimer: While such material is published with permission, RAMS is not responsible for its accurateness or completeness.  This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.