Third-Party
Im a broker as a preface to this topic. I just got called from an oz bargainer who wasnt sure their broker either explained things properly or he didnt know if he could find a better deal elsewhere. (What the other broker didnt explain is that in most occasions self employed clients have to go to a subset of lenders to pass servicing and get the loan approved).
Because im an ex cba big 4 bank home lender who has done a lot of self employed lending i thought id write it all here. Whether you choose to message me or not id rather give as much as possible and help people especially the self employed during covid19 times.
What do most lenders want for a full doc loan?
- 24 months registered abn
- If declaring over 75k income gst registered for 12 months
- Up to date with bas and tax payments
- 2019 financials lodged with the ato - can be used right up until 2021 March at most lenders
- ASIC report to show who are the directors under the abn
- 6 months business bank statements
Different types of self employed applicants
- Sole trader
- Company
- Company multiple directors
- Complex multi structures normally running things through a discretionary trust
What are lenders doing right now to lower their risk for self employed applicants?
- Even if you only need 2019 financials - lenders are doing spot checks on your last 6 months business bank statements and or checking your last 2 quarters bas to double check your figures havent gone down since covid 19 started.
- Lowering the lvr they are willing to give self employed applicants
- Some banks have zero deal appetite for self employed right now even when they have self employed advertised products
How do lenders look at your income?
Sole traders - simple
- Sole traders they look at your last 2 tax returns and 2-3 banks take the most recent years income, the rest will look at the past 2 years income and depending no how big the gap is in income will go off the lower of the 2 years or the average of the 2 years income.
Companies its a little more complex - A little more complex
- Net profit + salary and wages + addbacks like interest expenses / depreciation / bad debt write off
- Banks look at 2 side by side years and go off the average or lower year depending on how big a gap in the income over the 2 years. Most banks do this which is why borrowing power is so much higher at banks that dont do this.
- 2 to 3 banks will go off the most recent year higher income
Which banks do we write the majority of our self employed homeloans through?
No use hiding this - ANZ / CBA / Bankwest - Use to be citibank in certain circumstances as well but we dont use them much in this space anymore.
Why?
They take the most recent higher years income + have better policy on addbacks + havent reduced policy as much as other banks during covid19 in the self employed space
Ok thats great what other options are there?
- If your income is the same over both years or high enough on the average or the lower of the 2 years then we can go to any number of other lenders. But to be honest most deals for self employed are placed due to financial position which is why the majority have to go to cba anz and bankwest.
Are there any lower doc options
Think the lower doc options and the higher the lvr goes the higher the interest rate.
- Yes the likes of la trobe / pepper money / liberty / bluestone
- You will get a mixture of lower doc products like supplying business bank statements and bas statements for 12 months.
- ANZ had a 65% lvr low doc option but the product got removed
- Some lenders do abn 1 day and or abn registered 12 months as well.
- All these lenders removed their lower accountant sign off and self declaration for income products.
Is there any lender that does accountant sign off and or self declaration like in the past?
Yes ive had a lender come on recently that does this at pretty decent rates compared to competitors. Feel free to pm me if you need help in this space.
Let me know if you have any questions
Kind Regards
Adrian Player | Director
M: 0416643638
W: www.integralloansolutions.com.au
Adrian Player is a credit representative (498364) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237).
Interesting post.