Hi all,
Just seeing if anyone has recommendations for self-employed home loans?
A bank/mortgage broker who understands self-employed are trying to reduce taxable income… !
Looking at purchasing an owner-occupied apartment in Adelaide, maybe off the plan.
Any tips or pointers much appreciated!!
I think Adelaide is a bit tighter restrictions than Sydney or Melbourne because less demand, fewer developments. It's inherently risky still of course.
I think the pros are:
- Stamp duty concession (depending on stage, up to 100%) for buying off the plan
- Adelaide has additional council concessions for new/renovated apartments. Some even have strata concessions for the first year, $5k white goods vouchers etc.
- Entry point into market, allowing to save between deposit vs completion date
- New apartment and facilities
- Choices with finishes etc and option to purchase something that isn't mixed hotel/residential/investor-haven (most established apartments in Adelaide are this).
The alternative is sort of waiting until developed, probably a bit more expensive and none of the "I'm the first to own this" good vibes!
I do feel like I want to do it
There's a tonne of different home loan products for every scenario.
-How long have you been self employed for? At least 2yrs?
-Have you got at the very least your YE2015 & YE2016 returns completed (although bear in mind very shortly you'll need your YE2017 returns as come by March-May depending on the bank, YE2015 financials will no longer be acceptable).
-How much is the apartment you're looking to buy?
-What size is the apartment?
-Your income and liabilities will determine how much you can borrow (along with all the above).
Definitely, happy to provide all to lender/broker. Self employed since 2011, mixed of payg and self since then. It's just finding the right lender who can see overall picture and not just do "net $x, therefore this".
A bank/mortgage broker who understands self-employed are trying to reduce taxable income… !
This is a very interesting scenario, one that I have thought about before but never knew the answer.
Here you have 2 conflicting requirements, one to reduce taxable income by doing cash jobs, the other you need a decent number in your tax statement to get a decent loan.
You can tell the bank about the cash jobs and even demonstrate an increase in deposits not in line with taxable revenue, but they cannot accept cash jobs as income.
Would it be possible to save a sizeable deposit from all the tax savings and the bank could lend you a smaller principal amount?
Yeah exactly, 2 opposites. But just to explain, it's not cash jobs, it's like, you had a good month sales-wise, and so will use that capital to invest, increase ad spend or other marketing initiatives.
So it's putting non-essential personal expenses to one side, just taking enough to get by, and investing in legitimate deductible expenses that if done correctly should grow the business. Because they are deductions, they're offset against gross income thereby reducing tax (generally).
It's true I could try and take a lot more of the profits if needed to, but it risks not growing the business.
Complicated!
OK so if all revenue is above board and revenue is good, there really shouldn't be an issue. You are making capital injections into the business, they shouldn't be counted as operating expenses / losses.
Exactly, just finding a lender to understand that and see past net personal income.
I know there's Pepper but they're around 2% above the others interest rate wise.
Thanks, I haven't, I'll check it out. I know that in Adelaide the "We buy houses" / rent to own schemes are not quite legal.
Which lenders/brokers have you spoken with so far who did not fit your criteria?
I've spoken with Pepper and a few of the name brand mortgage brokers e.g. Aussie. Pepper were happy to go with it, it's just the interest rate wasn't very competitive. Aussie was very standard and just said no over the phone without an appointment.
Before applying to any, guess just wanted to see if anyone recommended a lender or broker.
traditional banks will make you jump through a lot of hoops the moment they hear self-employed. A mix of reasons including regulatory scrutiny and assumed past risks are among the causes for this. I've know people who earn 200k+ pa self employed but still had to jump through hoops to get a mortgage.
Rams have low doc options where if your accountant will sign off on your projected income they wont look at previous tax returns and will use the accountants figure. It will always require minimum 20% deposit and a higher than advertised rate (still cheaper than pepper though). I know a few guys there who may be able to help you if you want to send me a PM.
Sounds like a viable option.
Sounds like a Low Doc loan might be your best option. Their rates are quite competitive nowadays but again that will depend on what documentation you can provide.
Low Doc income verification can typically be provided via any of these means:
If you can provide 2 of the above then normally it will attract a more competitive rate. I understand you're looking for the best rate but unfortunately you're not going to be able to achieve a 3.59% if you're going down a low doc path. Don't be discouraged by the rate though, if your numbers still work on the higher interest (and i'm not talking drastically higher - you can get low doc rates in the 4% range)then don't dismiss it if it means you can achieve your objective.
Thanks all, I'll check out some low doc options. I've heard of HomeStart ( I think only in SA), that might be viable and they have a few options. You're right, just see it as a means to achieve the goal of getting the apartment, not the "marriage-material"/ideal loan.
Homestart don't offer any Low Doc options unfortunately. So if you are self employed, they'll need the most recent 2 yrs financials/tax returns to verify income.
It sounds like you have to make a choice from the available options you have now or spending the next couple of years in business foregoing growth so you can satisfy the bank for a cheap mortgage.
Is there an in-between strategy of qualifying for a higher interest loan now and making adjustments to your business over the next couple of years so that you can switch to a lower interest rate loan in the future?
I also wonder if it would be worthwhile getting your Accountant to prepare some figures that include "add backs?" eg, internet, phone, car - costs incurred by the business that a salary earner would have to pay for after tax (but you pay for before tax)?
Good luck OP.
Thanks, good points. I'll see what I can do with the "add backs", hadn't considered that.
The only thing I have any knowledge in advising is do not buy off the plan.
http://www.news.com.au/finance/real-estate/buying/what-happe…
http://www.afr.com/real-estate/dont-buy-a-melbourne-apartmen…
https://www.domain.com.au/news/melbourne-newlyweds-dreams-cr…
https://www.domain.com.au/news/nsw-government-launches-new-i…