Mortgage Deposits for Self-Employed Buyers
Self-employed homebuyers often assume they won’t qualify for the best mortgage deals, as lenders traditionally favour those with more predictable incomes. But with freelance, contract and fixed-term roles on the rise, more and more providers are offering loans to the self-employed.
As a wider range of products is made available to the self-employed, the deals offered are becoming more favourable. But what impact, if any, does this have on the size of the deposits that buyers need to stump up to take out a mortgage?
In this guide we’ll take a look at some of the factors that can affect the size of deposit you’ll need to secure a home loan as a self employed borrower in Australia, and how the experienced advisors we work with can help you to find the best deal for your circumstances, and with a deposit that’s well within your means.
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[/vc_column_text][vc_row_inner][vc_column_inner width=”1/3″][/vc_column_inner][vc_column_inner width=”1/3″][tek_button button_text=”Get Started” button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Fcontact-us%2F|||” button_position=”button-center”][/vc_column_inner][vc_column_inner width=”1/3″][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_separator color=”purple”][vc_empty_space][/vc_column][/vc_row][vc_row full_width=”stretch_row”][vc_column offset=”vc_hidden-lg vc_hidden-md”][vc_separator color=”purple”][tek_calltoaction cta_icon_type=”no_icon” cta_title=”We’ll match you with your perfect mortgage broker” cta_subtitle=”Save time & money with an expert who specialises in cases like yours.” cta_text_color=”#000000″ cta_button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Fcontact-us%2F|||” cta_button_text=”Get Started”][vc_empty_space height=”50px”][vc_separator color=”purple”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Do self-employed borrowers need larger deposits?
The good news is that almost all lenders will approve home loans for self employed applicants in the right circumstances, and with an estimated 17% of Australians now working for themselves, it’s certainly in their interests to do so. Your employment status alone should not, therefore, prevent access to the same deals and equally attractive deposit levels as employed applicants.
However, it’s fair to say that some lenders have a better understanding of the needs of self employed customers than others, and assessing affordability can be a more complicated process. For this reason you may find you have to jump through a few more hoops and look a little harder for a suitable lender than your payroll-dwelling peers before you can get to the best deals and secure the deposit size you want.
Working with a mortgage broker can save valuable time and ensure you are only dealing with providers that welcome self employed customers and won’t waste your time. The brokers we work with have strong experience of the self employed mortgage sector, and can help guide you towards the most competitive and well equipped lenders operating in this area. Please make an enquiry if you’d like us to put you in touch with one.
What factors can affect deposit size for the self employed?
Once you’ve found a suitable lender, your application will be assessed according to their criteria.
Like any applicant you will need to pass various affordability tests as part of this process, but the most important factor for self employed home loans is usually the number of years you can demonstrate that you have traded at a certain level of income, in other words how many years’ accounts you can provide.
Every lender has a different set of criteria that it uses to calculate affordability, and this will include rules on how many years of documented self employment income are needed to qualify for a loan. The lender will also have its own definition of what constitutes sufficient evidence of self employed income.
Generally speaking the more years you can provide this evidence for, the more likely you are to qualify for a more favourable loan to value (LTV) ratio, which will likely give you the option of paying a lower deposit if you wish to do so.
How many years of accounts will I need for a low deposit?
At higher LTVs, most lenders will want at least three years of tax returns (or alternative approved documents) as proof of sufficient income. So if a small deposit is your priority, you’re more likely to be offered one with a trading history of three years or more.
There are plenty of lenders that will approve home loans for customers with two years or even up to one year of accounts in the right circumstances, but you are less likely to be offered a product with a very low minimum deposit.
The bigger the mortgage, the greater the risk to the lender, and a longer trading history makes it easier to calculate a realistic average income, even if your earnings fluctuated over that period. However, there are other factors that can affect this calculation, even if your books are in perfect order per the lender’s requirements.
What other factors can affect deposit size?
Once you’ve provided evidence of your income as per the lender’s requirements, the lender will decide whether to make you an offer at a particular LTV based on your overall risk profile: less risk will usually mean qualifying for a lower minimum deposit.
In addition to assessing your income, lenders calculate risk by looking at factors such as:
- Credit history
- Property type
- Your age
- Your outgoings
See our eligibility section for more information on what lenders take into account when assessing applications.
Can I get a mortgage with 5% deposit?
Yes, there are several providers that offer 95% mortgages (5% deposit) to self employed customers.
You will usually need at least three years accounts to access these deals, but as long as you can provide these and the lender considers everything else to be in order, there’s no reason why you won’t qualify for one on grounds of your income type.
Speak to an expert on self employed mortgages
Being self employed need not get in the way of a securing highly competitive mortgage deal, but we understand that getting to the right lenders can be hit-and-miss. The expert advisors we work with have strong experience of successfully arranging home loans for self employed clients, an overview of the entire market, and know exactly which providers to approach.
If you’d like us to match you up with one of the specialist brokers on our books, call us today or make an enquiry and we’ll be in touch soon to arrange a no-obligation consultation at no cost to you.
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column offset=”vc_hidden-sm vc_hidden-xs”][vc_empty_space][vc_separator color=”purple”][vc_empty_space][tek_sectiontitle st_title=”We’ll match you with your perfect mortgage broker” st_title_tag=”h3″ st_subtitle_decoration=”” st_separator_enable=”separator_off” st_text_align=”text-center” st_width=”st_fullwidth”][vc_column_text]Save time and money with an expert who specialises in cases like yours
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