My Home Loan Application (Self-Employed) Got Declined. What Are My Best Next Options to Get A Loan?

OZBOND on 12/07/2021 - 21:59

Recently, my application for an owner-occupied home loan got declined :(

Background - I am self-employed. I draw a salary from my business which is a PTY Ltd. Because of Covid my business made a loss in 2020; for the first time since 2015. I/broker found a lender who was willing to consider 2018 and 2019 financials but it fell through because they would not recognise Stripe and paypal (where I have a fair chunk of my revenue reside) etc as proper banks.

Anyway, I am wondering what others are experiencing. What do you do next when your application is declined.

the few things I have been mulling:
- Put business on hold and take up employment with another company. Apply for loan after six months.
- Put all my efforts into current business and try and deliver two consecutive profitable years. And apply again after the business is in better health. But who knows what will happen with Covid still around
- Meanwhile, what can I do with my 20% deposit currently sitting in a savings a/c

My priority is to buy a house in the near future. How best can I move forward from here. Any tips?

Financial Home Loan

Comments

  • [Deactivated] on 12/07/2021 - 22:01
    +8

    You keep money in your Paypal and Stripe accounts? Holy shit!

    Our Stripe balance is paid out the second it is settled. We keep a balance with Wise for easy outgoing payments, etc. but the bulk of the cash sits in a bank bank.

    • OZBOND on 12/07/2021 - 22:07

      yes. main reasons - 80% of my business is overseas. it's easier to refund customers or pay suppliers in their currencies. Once money is transferred to Australian bank accounts it's a major hassle to convert currency again when the need to do business overseas arises. Nevertheless, I am now consistently doing monthly transfers to my Australian bank. Lesson learnt. Lenders only want Australian bank statements.

      • [Deactivated] on 12/07/2021 - 22:10
        +3

        wise.com

        We pay a lot of people overseas too, its amazing.

  • Azrael169 on 12/07/2021 - 22:36
    +6

    You need a decent/better mortgage broker. Search online, you want someone who is accredited with 20-30 lenders minimum. Their likely is a smaller lender out there who will lend you money but you will find you either need a bigger deposit or you'll get hit with a higher interest rate.

    • OZBOND on 12/07/2021 - 22:47

      good point. thanks

      • Azrael169 on 13/07/2021 - 12:06
        +1

        Maybe try a Lender like Liberty - though you can only access them through a mortgage broker. I know they cater to self employed and people who run a business.

  • AustriaBargain on 13/07/2021 - 00:05

    You could invest the money and just rent. Renting costs "more", but you free up more money to invest more because you aren't paying off interest on a loan. There's no guarantee that houses will be worth ten times as much 10 years from now. If it were guaranteed then rich people would have bought every house in the country by now.

    • netjock on 13/07/2021 - 06:38
      -1

      Hype is doubles every 7 years. Good luck to those with $1m houses but making $80k because they bought 10 years ago. Can't really sell (because stamp duty will get you on the next one), can't refinance (income doesn't support it), can't retire because pension doesn't pay all your bills and super is a bit low, a bit stuck.

      • kipps on 13/07/2021 - 19:33
        +1

        Buyer pays stamp duty. Refinance is obviously on purchase price unless you need cash out so that’s wrong too. Pension isn’t excluded by your PPOR either. You seem to get it all wrong. Troll much?

        • netjock on 13/07/2021 - 20:02

          Troll much?

          Really?

          Can't really sell (because stamp duty will get you on the next one)

          Sell then you become a buyer and stamp duty gets you.

          I don't think you get what you're on about.

  • Platinumtelecom on 13/07/2021 - 08:16
    +1

    These guys I am told are fantastic
    https://www.wealthyyou.com.au/

    My partner saw lots of great reviews about them on forums etc… and also had a conversation with them and they seemed switched on

    Worth giving a call and explaining your situation

    • OZBOND on 13/07/2021 - 11:23

      thanks. Will look them up

  • Youfah Mizzum on 13/07/2021 - 08:52
    -1

    There's been a few recommendations for other brokers already.
    With regards to your 20% deposit - get that out of a savings a/c ASAP.

    Open up a share trading account with cheap traders such as SelfWealth & grab 4 or 5 ETFs which seem to be doing well. I'm currently getting around 12% to 14% of my initial funds. Some ETFs to consider, VDHG, NDQ, VGS, IJR. Plenty of others.

    • whitelie on 13/07/2021 - 09:40

      Good advice if he wants to make money/increase his deposit, bad advice if he still wants the home loan.
      The bank won't see it as genuine savings if it's in an investment account and will then take another 3 months of being in his bank/savings account when he moves it again.

      I effectively did the same recently and my broker told me to move it out ASAP, was no issues in the approval process after that.

      • star-ggg on 13/07/2021 - 10:42
        +6

        Putting money that you definitely need in 6 months in the sharemarket is a terrible idea

        • lunchbox99 on 13/07/2021 - 11:22
          +1

          Yes. If the sharemarket was to dip in the meantime, you would be forced to keep it in the market to wait for a recovery. Plenty of big time players have been predicting a correction due to overinflated prices. P/E or Sharpe ratios are all sky high.

      • OZBOND on 13/07/2021 - 11:25

        interesting. is there a recommended time deposit money need to be in savings account? do lenders care if deposit is available at the time of applying for a loan?

        • whitelie on 13/07/2021 - 11:28
          +1

          3 months for them to be considered "genuine savings".
          Yes, they will want to see "genuine savings" as a deposit. Anything tied up in shares is an asset will may help the approval but won't be considered as the deposit which is ultimately what your interest rate, LMI etc are all based off.

          • OZBOND on 13/07/2021 - 11:36

            @whitelie: I see. Looks like investing deposit money is fraught with risks.

            • whitelie on 13/07/2021 - 11:42
              +1

              @OZBOND: There's always some level of risk, the closer you get to applying, it's just better to have it in a regular savings account. From the bank's eyes, they need to see some kind of history that you can service the loan.

              Was your deposit in the savings account for a while before you applied on your own? As others are saying, go thru a good broker now. It will get harder if you get knocked back again as bank's will question those applications on your credit file.

              • OZBOND on 13/07/2021 - 12:08

                @whitelie: yes, deposit was always in savings account. Was knocked back mainly because my business made a loss in 2020.

                So the fact I got declined once is in my credit records :( Gosh how difficult is getting a loan. Will need a good broker to advice me on what to not do or do

  • johndowy on 13/07/2021 - 10:21

    How badly did covid hit your business? (Numbers would be nice)

    • OZBOND on 13/07/2021 - 11:28

      around a 80% drop in revenue in 2020. Roughly 80K. But it looks like in 2021 we will breakeven, or see only a small loss like 1K.

      • onetwothreefour on 13/07/2021 - 12:49
        +1

        Jeez I hope that's after you have taken out your salary. Hope you are doing OK!

  • thefreelunch on 13/07/2021 - 20:16
    +1

    Do everything in your power to make sure your company at least breaks even in 2021. If you draw an income from your company and the company is losing money it's a huge red flag for lenders. It suggests your income, which will repay the loan, is not sustainable. This was a very common issue last year because the banks discount government subsidy by 100%. This comes back to the responsible lending laws, which for many small businesses produced the bizarre outcome that they could receive government subsidy to sustain their business but not spend the subsidy if they wanted a bank loan.

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