Questions & Answers - Self Employed

Thank you for your question.

If you have a home loan you can still own and develop your own share portfolio. It is up to you how you manage your own finances and what strategy you have in how to pay off your home loan more quickly in comparison to using surplus funds to build an investment portfolio.

You obviously need to make the minimum monthly, fortnightly or weekly repayment on your home loan and if you can pay more than you will reduce your loan term and create greater equity into your property.

If by building a share portfolio and you are successful in obtaining dividends from your shares then you can use the dividends to pay into your home loan to reduce the loan balance and create further equity.

Best of luck with the share investment and paying off your home loan.

A real estate agent is not under any obligation to disclose any bids from other parties to you and vica versa.

However the real estate agent should advise all buyers that there are other interested parties and that your offer could be more or less then the other parties.

They don’t have to disclose figures as it is unfair to the other buyers.

In an auction though all offers are on the table on the day or night and all buyers get to know their competition.

Best of luck with the buying process

When a home loan provider assesses a self employed person for a loan there are two different ways that they do it.

The first is what is known as a "Full doc" or "fully verified" loan where a customer supplies their last two years personal and business tax returns as well as financial statements. As the home loan provider is able to obtain an accurate idea of how the customer and their business is trading, they are able to offer a standard rate of interest if the customer qualifies under their lending guidelines.

All provider require a customer to show consistent income over a two year period, as evidenced by the tax returns and financials.

The second method is known as a "lodoc" or "litedoc" loan.

In these cases a self employed customer does not supply the tax returns and financial statements and is usually asked to sign a declaration stating they are trading profitably and can afford to repay the loan. You may also be asked to supply BAS or bank statements to support this. To mitigate the risk to the provider in not seeing the financial statements the customer will be charged a higher interest rate.

Unfortunately, in your case it sounds as though your income figures have not been consistent for two years and the home loan providers are using your lower figures in their calculations to see if you can afford the new loan.

As you say you are looking for a cheaper rate it sounds like you may already have a lodoc product so you may have to wait until business figures become more consistent to obtain a lower rate product.

You can but there are things you need to be aware of upfront.

You will need to provide - Your fully completed and lodged tax return for your first year as being self employed.

- Your income within the tax returns obviously needs to be sufficient to service the loan amount as per the home loan providers lending policy.

- You will also need to provide your previous year’s group certificate as an employee. If you do not have the tax returns completed then as a lo doc borrower you will need to have been self employed for 2 years with an ABN for 2 years and GST registered for a minimum of 12 months.

You will obviously also need to satisfy the home loan providers lending policy in terms of deposit, savings and credit history

Absolutely a self employed borrower can obtain a home loan.

There are a couple of aspects a self employed borrower needs to be aware of though.

If you have been self employed for longer than 2 years and have all your company and personal tax returns up to date then you are able to apply for the full documented loan as most borrowers can.

If you have been self employed for longer then 2 years and have not completed your tax returns you can apply for what is considered a lo doc home loan.

A lo doc loan is generally at a higher interest rate then a standard loan however as long as you have had your ABN for 2 years and are GST registered then you can still apply for a home loan.

A lo doc requires the self employed borrower to certify their income and the loan to value ratio available is generally lower then a full documented loan.

Some home loan providers will only allow you to borrow between up to say 80% and in some cases only 60%.

It is very important that a self employed borrower does their research before applying for a home loan.