Self Employed Home Loan Requirements
Also see: Home Loans For Commission Earners
Judging from the responses we are receiving from the banks recently its clear to see that securing home loans for self employed clients is not as easy as it once was.
The major banks have definitely clamped down on their borrowing rules concerning self employed business owners. On average, we are finding that the maximum home loan ratios applicable to self-employed clients will not exceed 90% of the property price.
While each application is assessed according to its own merit of course, it is also easier to secure finance through a bank where the business banking portfolio is held.
Basic Application Requirements For Self Employed Clients
Here are a few requirements for securing a home loan for any self employed applicant:
- The business must be operational for a minimum period of 3 years.
- The business account must reflect income deposits – cash payments are unacceptable.
- Accounting business financials must be produced for a period of 3 years, which indicate the financial position of the business, profitability, cash flow etc. This comprises of an income statement, balance sheet, statement of assets and liabilities, cash flow statement, and accounting notes to the financials.
- Proof of business registration which confirms business ownership
- If the latest financials are unavailable, then recent management accounting reports must be submitted for assessment. The management reports usually include an interim income statement and balance sheet signed off by the business accountant and business owner.
- Proof of yearly tax returns are rarely called for, however, these can be requested based on each individual’s type of business.
Key Factors Your Application As A Self Employed Client
The key factors that the bank will look at when assessing the financial and banking records is:
- the profitability position of the business,
- available balances in the bank account at the end of each closing month,
- and the ratios between assets and liabilities for the business
Overall, the business needs to reflect a positive financial position and steady growth over the 3 year period.
Contractors could also be viewed as self employed applicants, and in this case, a most recent personal tax return accompanying the signed employment contract and a 6 month record of salary payments would be called for assessment purposes.
For more information regarding the minimum requirements for self employed applicants, feel free to contact one of our consultants.
Related: Home Loans For Commission Earners