Self-employed and thinking about a home loan? Small business owners Kyal and Kara talk through their application process and breakdown the steps you need to know!

Transcript:

Because Kyal and I are small business-owners, there are a number of factors we need to consider when arranging a home loan.  Whether it be for our own home or for an investment property.  So if you are self-employed like us, here are a few tips from our recent experience that might come in handy for you.

Essentially what we needed to do is determine how much we could borrow.  Not only how much we could borrow, but how much we could comfortably afford.  To work this out, we firstly contacted our accountant to learn and better understand our income and our net profit.  Once we understood these things we were then able to construct the personal budget.

Some of the things we considered in this budget were our essential everyday living costs.  Like groceries, water and council rates and power bills.  Our current debt commitments, including existing loans, credit cards and investment property repayments.  And then our lifestyle - things like gym memberships, surfboards, holidays, entertainment and eating out.

After we were familiar with our existing financial commitments and expenses, we were able to work out an affordable deposit and collate the information required for the home loan process.  For us, we were able to provide the required documentation including individual and company tax returns, business activities statements and financial statements including profit and loss accounts and balance sheets.  

But if you're self-employed you could consider applying for a specific self-employed home loan, which Rams offer.  This includes a simpler set of paperwork that may include just your business activity statement, your declaration of income and confirmation of that income from your accountant. A self-employed home loan could offer you flexible solutions if you don't have all your financial statements or tax returns ready at the time of your application and could help you get your application in sooner.  But keep in mind, interest rates may be higher compared to a standard loan.

For us, having worked out that we were able to provide the standard set of documentation required, we were then able to work out our loan to value ratio and whether we would require lenders mortgage insurance.  This would generally be required if we were unable to contribute a deposit of at least 20% of the market value of the property.

With the help of our accountant and our local Rams home loan specialist, this process was a lot easier than we originally imagined it would be. Collating all that information was a great way to learn where our company was at and what our options were to take that step forward and apply for a home loan.

Now let the fun begin.