Self-employed loans or low doc loan products are flexible solutions for self-employed people. Basically, such loans are designed for those who have income but can’t produce evidence of income in the form of tax returns or financial statements.
A self employed home loans is based on a self verification process in which the applicant states his or her income on a form. The applicant mentions income on an income declaration form and the lender verifies it without asking for supporting documents of any kind. In short, the applicant doesn’t have to submit any solid proof of income to get the loan approved. The bank follows the credit assessment method to check if the applicant can afford the loan on the basis of the declared income or not and it’s pretty easy to get a self employed home loan approved in Australia.
Who is Eligible?
Low doc loan products are for small business owners, freelancers, entrepreneurs and contractors who’ve no fixed or regular income but the capability to pay off the loan. These loans are designed in a manner that they can fulfill the needs of businesses, ABN holders and contractors as applicants. All such applicants are self-employed and can’t provide documents as proofs in order to qualify for standard loans offered by big lenders. Low doc finance is available for people having normal jobs also. However, it’s just advisable for salaried people to first try and get standard loans.
Self-Employed Home Loans: Basic Factors
The current scenario of low doc home loans is a little different from what it was earlier. Now, lenders are least interested in approving self-employed loans quickly. Obtaining a low doc or self employed home loan is no more a sitting duck as the process does involve some complications especially if you’re not in touch with a specialized lender. Simple home loans are still fine; but if you want a loan to refinance your existing mortgages, it is quite difficult. Also, to get a home loan without a BAS statement to prove declared income is not always easy.
Your lender would ask for BAS statements to authenticate your income statement. But, not all lenders necessarily require proper documentation in the loaning procedure. There are people who are into ‘pay as you go’ jobs but cannot prove income with payslips. There’re alternatives as well. Some lenders don’t approve applications for refinance and others may consider. You just to keep trying until you get one and it shouldn’t take very long.
Self-employed Loan Assessment
The assessment method for Self managed super fund loans differs from one lender to another. However, common rules are always there that need to be followed. On an average, a lender accepts low doc home loans for 60% of your property’s value. Some lenders offer loan for up to 80% of the value of your property and in some exceptional cases, lenders consider lending up to 90% LVR (Loan to Value Ratio). Higher percentage of property means higher interest rates and fees. That said, if you can spend some money from your pocket, it’s advisable to get a self employed home loan at the lowest possible LVR. Some lenders ask for ABN that’s been registered for at least two years. But, normally your lender will accept an ABN registered for only one day to start a business.
Author Bio: Andrew is a specialist Redrockmortgage consultant specializing in Mortgage finance. Andrew’s knowledge and experience in mortgage finance has personally assisted his clients around Australia to achieve their business, financial and investment goals.