There’s nothing quite like the sweet satisfaction that comes from holding a shiny new set of keys to your very own home.

If you’re a self-employed borrower, you’ve no doubt worked hard to get where you are and you deserve to enjoy the fruits of your labour. Here are our best tips for buying a home when you’re self-employed – but be warned, you may feel tempted to break out a spontaneous “happy dance” when you secure your new digs. It’s that exciting!

1) Save the nest egg

If you’re considering buying property in the not-so-distant future, it’s a good idea to start saving and planning the purchase well in advance. Lenders like to see a solid savings history over several months when assessing home loan applications.

While you may be able to borrow up to 95% of the property’s value by using your personal and business tax returns from the last two years to verify your income, you will be subject to Lenders Mortgage Insurance (LMI) if you have less than 20% for your deposit. LMI protects lenders if you default on your home loan and it can be costly, so it’s a good idea to aim to save a deposit of 20% or more.

2) Be fastidious about financials

As a self-employed borrower, one of the best ways to maximise your chances of approval is to make sure your financial records are up-to-date and accurate. Lenders are typically more careful about granting home loans to self-employed borrowers, as your income streams fluctuate more than PAYG applicants and it’s more difficult for lenders to gauge whether you can meet repayments into the future. The Australian Securities and Investments Commission (ASIC) also requires lenders and mortgage brokers to ensure you are able to repay your loan without suffering financial hardship.

Lenders like to see consistency of income, and if your financial record-keeping is top-notch, it will be easier to illustrate your earnings and ultimately have your loan application approved. If you’re self-employed and thinking about buying a home, it’s a good idea to have your last two years’ financial statements, income tax returns and notices of assessment ready to go.

3) Get your accountant on the job

One challenge self-employed borrowers may face is not being able to prove they can service a loan because their accountant has been clever about reducing their taxable income. While you may save money on your tax bill, reducing your taxable income can also affect your ability to apply for credit and invest in property. It’s important to talk to a qualified accountant about your home buying aspirations and the tax implications. We have some great contacts, so let us know if you need a referral.

Often there are business expenses that can be added back to your taxable income to work out your borrowing capacity. These “add-backs” include larger stand-alone costs, non-cash expenses like depreciation, additional super contributions, and interest on loans being refinanced. Talk to us about whether “add-backs” could improve your chances of being approved.

4) Provide the necessary documentation

If you’ve been self-employed for more than two years, you can verify your income by providing two years of personal tax returns and the correlating ATO notices of assessment, two years of tax returns for all entities (company, trust, Self-Managed Super Fund), and two years of profit and loss statements (if applicable).

If you’ve been self-employed for less than two years, the income requirements on Alternative Documentation loans include: six months of Business Activity Statements, six months of business account statements, six months of personal bank account statements, confirmation of ABN and confirmation of GST registration. You will also need a letter from your accountant confirming your full legal name, trading name, how long the accountant has serviced you, gross taxable income for the past three years and any relevant deductions.

5) Talk to us about pre-approval

Organising pre-approval before you begin looking for a property will make the process a whole lot easier, as it will give you a realistic idea of how much you can afford to borrow, so that you can put a budget on your search and find the home you want sooner. We can help you establish your borrowing power and determine your eligibility for finance. We’ll explain the merits of each lender and which loans could work for you.

As part of the pre-approval process, we will approach your lender of choice, who will check your credit history and verify your income. Pre-approval gives you an assurance from the lender that you can take out a loan up to a certain amount – handy ammunition when trying to convince real estate agents and vendors you’re serious about buying.

6) Find your property

Once you’ve organised pre-approval, it’s time to find the right property. Remember, this is one of the biggest decisions of your life, so it pays to do plenty of research before choosing ‘the one’. Make sure you get a building inspection done to check for issues such as structural movement or plumbing problems, as well as pest inspections for termites and other unwanted guests. A solicitor or conveyancer will be able to take care of the legalities involved in buying the property.

7) Apply for your home loan

As your mortgage broker, we will find the right home loan to suit your financial situation and future objectives. As a self-employed borrower, we can help you find ways to make your cash flow work harder. If you are a contractor or sub-contractor, you may be considered ‘an employee’ rather than self-employed by some lenders, so it’s worth asking us to check.

If you’re self-employed and looking to buy a home, it’s a good idea to consult a mortgage broker like us to discuss your options. Lenders’ policies vary widely when it comes to self-employed applicants, but we know which ones will view your application most favourably. We’ll explain your buying capacity, provide advice about which application method would work best (given your income and documentation), and help maximise your chances of approval. Best of all, you’ll feel confident in the knowledge your home loan is structured correctly from day one, so that it works for you.

PS. We won’t judge you if the “happy dance” happens in our office. We may even capture it on video and post it on our Facebook page!

7 easy steps to buying a home if you’re self-employed

Out with the old and in with the new! What better way to start 2017 than with a make-over for your most valuable asset?

Whether you’re ready for a complete home renovation or simply want to bring your house up-to-date with a few cosmetic changes, you’ll want to get on top of the latest trends so you can make some wise choices on where to invest your budget. Here are 7 top renovation and décor ideas that could help you make sure your money is well spent.

  1. Get eco-friendly.
    People want more sustainable homes and as eco-friendly renovations genuinely help to make older homes more sustainable, they’re on trend in 2017. Essential considerations are sustainably produced ceiling and wall insulation, the general use of sustainable building materials, built-in waste management systems, rainwater tanks and water recycling systems, solar energy panels, green walls and leafy facades. Roof gardens and passive design elements that provide natural light and reduce heating and cooling costs are also popular. You probably won’t want to go as far as foregoing the dishwasher or air conditioner entirely, but you should invest in energy saving appliances wherever possible.
  2. Create more space and make it more interesting.
    More spacious homes (or homes that appear to be more spacious) are ever popular with home buyers today, so renovations that include extending or adding extra rooms to your home are still great ways to add value in 2017. However, rather than just focusing on knocking all the smaller rooms into one big open plan communal space, the new trend is to also provide options for privacy, with spaces that offer interesting nooks and crannies where people can escape with their personal technological devices and do their own thing.

    Roof rooms and attic renovations are going to be popular in 2017, because they provide opportunities to add a point of interest and difference. The open, spacious look is still the fashion, however finding ways to add character and uniqueness are trendy too.

  3. More efficient storage spaces.
    Investing in upgrading your laundry to create and maximise storage space was a very popular option for home renovations last year, and this is all set to continue into 2017. Maximising your storage areas means you can keep all of your untidy clutter out of sight, which will make your home appear much more spacious and help you keep the look up-to-date, with clean crisp lines. Adding clever storage that utilises any dead space in your home is an easy way to add value, particularly important if your property is a family home.
  4. Terracotta Tiles.
    If you’ve been around long enough to have survived the ‘80’s, you may be very surprised to learn that terracotta is back in fashion for home renovations in 2017. Interior trends are now moving away from the cool tones that have been popular for the last decade and designers are returning to warm colours and natural materials that add character.

    Today’s fashion in terracotta calls for a smooth matte finish with crisp edges and a more finished look. The idea is to add warmth and depth with natural colours and materials, so consider using your terracotta tiles on feature walls or for cladding fireplaces.

  5. Darker Wood Tones.
    If you are tired of the blonde wood look of the world’s recent ‘Scandi’ obsession, you’ll be happy to know that darker wood tones are finally back for homes in 2017. Remembering the current trend is for warm, natural materials that add character, you can now go ahead and use darker wood and natural timbers as feature walls and flooring. Consider adding texture by using it in herringbone tiling on floors, or by choosing interesting darker wood furniture pieces as focal items.
  6. Go natural in the bathroom.
    Updating the kitchen and bathroom in your home is one of the tried and tested ways of adding value and is one of the main motivations for choosing to renovate for many home owners. Bathroom makeovers in 2017 will also follow the new interior design trend that combines modern, clean lines with natural materials and organic warmth. Functionality is also an important consideration to home buyers today, so try and choose materials that are easy to clean and maintain to generate the most value.

    Remember that sinks and baths with classic, elegant, clean lines are always timeless favourites. Add that natural touch by using wood in warm tones for accents and furniture or accessories. Don’t forget the terracotta in the bathroom too – add some extra organic depth with a fern in a terracotta pot or consider a small terracotta sculpture.

  7. Create more curb appeal.
    A garden makeover that creates more curb appeal for your home is still one of the best investments you can make in terms of adding value this year. Garden design is now moving away from that harsh, minimalistic look that has been popular of late and following the new interior design trend of a warmer, more welcoming look that incorporates natural materials.

    Create a more natural style by staying away from geometric design layouts. You can achieve a more authentic, organic feeling in your garden by using recycled materials, free-form decks, stepping stones or meandering pebble paths. Locally sourced is the buzz word of the year, with native plants and shrubs planted in abundance adding charm.

Talk to us about renovation finance and budgeting.

Over capitalising is one of the greatest dangers when making home renovations, so be careful to set a practical budget and resist the temptation to splurge on too many designer or big brand items. They may make you feel good about what you’ve created, but they won’t add more value and you risk losing money if you decide to sell. If you need help working out how much money you can afford to invest in your renovation project, please give us a call and we’ll be happy to help.

Once you’ve set a practical budget, forward planning for how you intend to finance your renovation project is also a wise idea. Depending on how much you plan to spend, there are a variety of finance options that you can choose from, so talk to us before you start your renovation project so we can help you get it organised. Financing your renovations could mean refinancing your home loan to access some of the equity, taking out a line of credit, or perhaps a personal loan. To find out which option is the right one for you, just give us a call for a chat today.


Copyright 2016