Self-Employed Mortgages: Occupations

February 26, 2020 Pete Mugleston Self-Employed Mortgages

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From more freedom to choosing when to work, there are many perks and benefits to enjoy if you’re self-employed or a small business owner, the biggest being that you get to do what you love in your chosen industry.

However, the downside is that it might be harder to secure a home loan. But could your chosen occupation impact the type and quality of your future mortgage?

In this article, we look at whether your self-employed occupation could affect your chances of getting approved for a home loan, whether the rules are different depending on the type of work you do, and how you can find home loan providers who’ll lend to the self-employed.

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Will my self-employed occupation impact my mortgage application?

It may do, as each lender will have its criteria relating to how occupations are viewed. However, many other factors could affect your chances of being approved for a home loan, regardless of your self-employed occupation. Depending on the lender, the following factors could apply:

How long you’ve been self-employed and earned income from your profession
Whether you have bad credit or a lower credit rating
The size of your deposit (ideally at least 5-10% of the property’s value, though some lenders may require more)
The property you’re purchasing meets a minimum specific size, for example, 40 sqm
Whether your business has expanded rapidly over the past year (they will likely want to know the activities which caused this spike)

If you set your business up properly – both legally and financially – your chances of being approved for the mortgage you want may increase. One of the biggest concerns for home loan lenders is a lack of evidence regarding regular earnings, so you can be prepared and keep track of your accounts and tax returns ideally for around two years.

You may be able to find a lender who will accept less than two years, though you’ll likely have fewer lending options.

Even if your annual earnings are strong, your income is likely to flux, so keeping evidence of earnings is the safest bet to increase your chances of getting a great home loan. However, there is a way to get a home loan without having to provide the paperwork.

Low doc loans

If you don’t have a way to prove your method of income, then a low doc loan may be ideal for you. Also known as no paperwork loans, these cater to self-employed individuals and do not need the documentation usually needed to prove your earnings.

You’ll likely need a higher deposit, provide business activity statements and have a registered Australian Business Number. You’ll also need to declare an approximate amount of income.

While rates for low doc loans might be higher compared to more standard mortgages, they provide more flexibility to suit certain lifestyles, and it certainly doesn’t mean that you have to settle for an extortionate rate. To find the best low doc loans, speak with one of the experts we work with.

Which occupations are covered?

Any professional occupation where you define yourself as ‘self-employed’ could be covered by a mortgage lender, as they may be more interested in how much income you’re generating, and how stable it is.

Below, we’ve listed a number of self-employed occupations and offered an overview of how they work in relation to a home loan application.

Contractor

As a contractor, you’re hired by companies to perform specific tasks, though you still retain control over how you operate. However, because many lenders define contractors as ‘casual workers’, you may find that home loan lenders could scrutinise your application more closely than they would for a full-time employed worker.

They could also treat your application differently depending on the type of contract work you do. However, there are plenty of lenders who would be happy to consider lending to contractors, no matter how they choose to work.

Here are three types of contract workers:

Self-employed contractor: As a self-employed contractor, you may be a registered sole trader with a registered Australian Business Number (ABN) showing that you have been trading for two years. Lenders may want to see further evidence of earnings if your income has notably fluctuated over a 12-month period, taking unpaid holidays into account.
PAYG contractor: A pay-as-you-go (PAYG) contractor is employed by companies on a fixed-term basis, and these workers typically have to prove that they have had plenty of experience with this type of work. It may not be uncommon for lenders to demand evidence of accounts for two years.
Sub-contractor: A sub-contractor can take on a mix of self-employed work and pay-as-you-go gigs. To avoid a potentially lengthier application, make sure that your accounts clearly define which type of work you undertook.

For the best home loan rates, get in touch. The home loan brokers we work with work independently, meaning that they can search for deals from a variety of lenders to ensure that they find the best match for you.

Dentists and doctors

If you’re a dentist or doctor and you trade as self-employed, you will be classed as having an ‘unusual income structure’ and may have to take more steps to get a home loan. However, your employment type as a medical professional could impact your application, including whether you’re a sub-contractor, or whether you are contracting through your Australian Business Number.

Limited company

If you’re the owner of a limited company, you might be able to pad out your personal income with your company profits when applying for a home loan. Home loan lenders typically calculate your income to assess how much they’ll lend you, though each lender will have a different way of calculating your affordability, and may consider your company profits.

However, we can put you in touch with an independent broker who can find lenders willing to consider your company profits as part of your application. Make an enquiry to find out more.

Director

As a company director, you pay yourself a wage through the company, so lenders will be keen to see what condition your company profits are. If your profits are healthy or have remained stable, you’ll be in a stronger position when it comes to applying for a home loan.

However, if your profits have fallen over a specific period, lenders may flag this up, though this doesn’t mean that you won’t qualify for a mortgage. By working with an independent broker, you could increase your chances of getting a great mortgage as they can find great deals from more relaxed lenders.

Taxi driver

As a self-employed taxi or Uber driver, you may have difficulty getting documentation that lenders would usually require to grant you a home loan. The good news is that a low doc loan may be just what you’re looking for, and you may even be able to borrow up to 95% of the property’s value.

Other professionals

If your self-employed occupation hasn’t been listed in any of the above examples, don’t fret. Whether you’re a musician, freelance writer, therapist or otherwise, you may have plenty of options when it comes to taking out a home loan.

Make an enquiry and we’ll match you with a broker who can walk you through your options – plus, getting in touch is free and there’s no obligation to take things further!

Where can I get the best home loan?

While there are plenty of comparison websites online and big-name lenders who can cater for self-employed individuals, this doesn’t mean that you’ll get the best deal.

However, by working with an independent home loan broker, you’re far more likely to get a more competitive home loan which works in favour of your self-employed occupation rather than punish you. Not only can they find highly tailored products, they can also do all the running around on your behalf and highlight the most important specifications on the small print.

Speak to an expert

As a self-employed individual, your job doesn’t fit the rules – so it makes sense that your mortgage doesn’t either. Which is why we work with the best home loan brokers, as they can find you the best offers for your needs and circumstances.

Get in touch and we’ll match you with a broker for a free, no-obligation chat about getting a mortgage which complements your self-employed lifestyle.