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Borrowing money tips for the self employed
See the world through your bankers eyes
Imagine for a second that you work as a bank manager or credit officer. You have a pile of mortgage applications on your desk for you to work through. You already know which ones are for self employed people, they're at least a 5 cm thick and spell disaster for your afternoon.
Wading through complex financials you find out that the "successful business" your customer has been talking about doesn't really have the same bottom line he mentioned when he was in your office that morning. You stamp the file declined and move on to the next one.
So how does the bank assess my income?
Banks usually look at your last two years tax returns. They'll get the Net Profit Before Tax from each year and just average it. They may adjust it a little to take depreciation into account but that is about it.
Did you know banks can consider adding back one off expenses? Get your accountant to write a quick letter confirming that the "bad debt expense" was because of a one off dispute with a customer and presto the bank can assess you with a higher income!
A few Australian banks have a flexible view and can use BAS statements, interium financials or just use one years tax returns. A good mortgage broker will find the lender that best suits your tax returns and will assess them in the most favourable way!
No tax returns, no financials home loans
The great news is that self employed borrowers can now self certify their income with a low doc loan! This is where an income declaration is used instead of tax returns to verify your income. All you need to do is complete an application form, assets and liabilities statement and declare your income on a form.
The bank will approve your loan with no other proof of your income! Best of all the paperwork is kept to a minium and the bank will lend you up to 80% of the value of your property. Easy!
Some lenders will require some limited supporting documents such as twelve months BAS statements, an accountants letter or six months bank statements. Discuss these requirements with your mortgage broker and they can select a lender that can work with the documents that you can provide.
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