5 Tips for Self-Employed Home Buyers: Melbourne Finance Brokers’ Guide

Whether entrepreneurs, freelancers or small business owners, Australia’s self-employed workforce is flourishing. According to a report published by the Australian Bureau of Statistics, 16.6 % of Australians were self-employed in 2021, which is expected to rise in the years ahead.

But for all their diverse talents and opportunities, these self-employed workforces face an uphill battle when securing a loan from traditional lenders. That’s where finance brokers in Melbourne come in, offering specialised advice and support for all self-employed borrowers. So, let’s look at the key factors that self-employed individuals should consider when seeking a home loan in the Australian market.

Income and Assets

One of the main challenges for self-employed borrowers is providing proof of a stable income. Traditional employees have pay stubs, while self-employed individuals often rely on tax returns and financial statements. Therefore, it’s vital to maintain well-documented financial records for a smoother and hassle-free process. Here’s what you should know:

• Tax Returns: Lenders typically evaluate a person’s income based on the tax returns filed in the previous two years. Always make sure to keep up-to-date financial records that can help in reflecting your actual financial position.
• BAS Statements: Business Activity Statements (BAS) can provide additional evidence of your income. Accurate BAS can reinforce your creditworthiness.
• Financial Statements: Preparing regular financial statements is a smart move as these statements can show all the data related to your business’s financial health, making lenders more confident in your ability to repay the loan.

By collaborating with finance brokers in Melbourne, self-employed borrowers can keep their finances organised for a smoother loan application process.

Credit History

A healthy credit score and credit history play a crucial role in the lender’s decision-making process and in securing a favourable loan term. Here are some key points to consider:

• Monitor Your Credit: Regularly check your credit report for errors or inconsistencies. Address any issues promptly to maintain a strong credit history.
• Credit Repair: If your credit history has blemishes, consider working with a credit repair specialist to improve your score.

Loan-to-Value Ratio (LVR)

In Australia, the Loan-to-Value Ratio (LVR) measures the loan amount against the property’s value. Self-employed borrowers should know they might be required to provide a larger deposit to reduce the lender’s risk. Aim for a lower LVR to increase your chances of loan approval and secure more favourable terms.

Loan Purpose

The more clearly you define the purpose of your loan, the easier it will be for you to secure it. Whether you want the loan for a residence, an investment property or refinancing, specifying your intention of borrowing the loan can impact the lender’s decision hugely.

Security

Lenders often require assets as security for the loan. You should leverage your personal or business assets as a self-employed borrower. This can include residential or commercial properties, vehicles, or business assets. Discuss your options with finance brokers in Melbourne to make informed decisions about the security you can provide.

Parting Words

Being self-employed in Melbourne offers incredible opportunities but presents unique challenges when seeking loans, too. You can navigate these challenges by maintaining proper financial statements, improving your credit history, understanding LVR, clearly defining your loan purpose, and strategising about security.

Moreover, the guidance of finance brokers in Melbourne can provide invaluable support throughout the loan application process. They can help you make informed financial decisions, ensuring that your self-employment journey continues to thrive while achieving your personal and business aspirations.

As one of the top finance brokers in Melbourne, Oz Lend is committed to empowering self-employed individuals to secure the home loans they deserve, making homeownership dreams come true. 

To take the first step towards achieving your home loan goals, contact the team of Oz Lend today!