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Getting a mortgage can be a huge step for anyone, but for business owners it can be significantly more challenging. Typical wage earners go through a simple process to secure a mortgage. Lenders usually look at payslips, banks statements and tax returns to establish an individual’s financial position, but for business owners the process can be a little different.

 
Getting a Home Loan as a Business Owner
 

Small business owner’s incomes often fluctuate and many, understandably, don’t issue themselves payslips, meaning it can be difficult for lenders to understand the financial workings of self-employed people. Despite this, getting a mortgage as a business owner is still possible. Here’s what you can do to make the process easier.


Getting a Home Loan

Organise Your Businesses Financials

A business owner’s income differs from the regular, consistent pay slips that employees receive. The amount that’s coming in and out of the business can fluctuate from month to month and because of this, lenders can be reluctant to qualify business owners for a home loan.

To give yourself the best chance securing a home loan, it’s important that your business finances are correct and up to date. Most lenders want to see two years of tax returns, your savings accounts and your capacity to deal with debt.

The more successful your business is, the more likely a bank will give you a home loan. Therefore, having accurate and up-to-date documents is key.

The Documents

Having the right documents and making it as easy as possible for the lender to understand your finances can mean the difference between having your home loan request approved or rejected. While you can find pre-negotiated home loans on HashChing, you can also ask a broker any related questions. When it comes to documents you will need to present the following to your potential lender:

  • Identification:

    For almost any financial endeavour, a form of identification is a necessity. Some may even require a combination of your passport or driver’s license and non-photographic forms like birth certificates and utility bills.

  • Income Statements:

    You will need to show both your business and personal tax returns and income statements. If your most recent tax return is several months old, a profit/loss statement might be necessary.

  • Financial Documents

    Other financial documents to include are bank statements, credit debts and any existing investments or assets.

  • Other Income

    If you make income from sources other than your business, these should also be included. This includes rental incomes, investment dividends or government payments.

Extra information can help

As we have talked about, business earnings can fluctuate from month to month, so therefore your most recent income statements might not be a good representation of your businesses current standings. Extra information can help lenders have a better understanding of your businesses finances.

Take the time to discuss your income and expenses with your lender or accountant to ensure they understand. Some expense might be one off or your income might have taken a hit due to a client missing a month for whatever reason.

Your credit history is important

Having a good credit score is essential for anyone looking to buy a house. Your credit history shows how you manage your finances and debts, as well as your ability to meet existing financial commitments.

Your credit history will always be looked at by potential lenders, so before applying for a home loan it’s wise to spend some time building up good credit.


Tips for Existing Mortgages

Make a Bigger Down Payment

Once you have a mortgage, there’s a few things you can do to make things easier for yourself. Making a bigger down payment in the initial stage of your loan can be a good move, especially if you have a less than perfect credit history.

Putting down a bigger down payment can reduce the term of the loan as well as lower the interest rate. This can help business owners as it means you can pay off the loan over a shorter term, save on accrued interest, or make smaller monthly payments.

Refinancing

If you’re in the middle of paying off your mortgage and feel your interest rate is too high, you can save money by refinancing your loan with a better deal. HashChing can help you negotiate a lower rate on your home loan which can potentially save you thousands of dollars over the life of the loan. This is a great way for business owners to find some extra cash to put towards business expenses, or their own salary.

Business owners may find it more difficult to secure a home loan than those who are employees, but it’s certainly not impossible. With accurate and up to date documents, the right mortgage broker and a healthy credit score, business owners can get approved for a home loan as easy as anyone else.

 
 
 

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HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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