Oct 6, 2018 8:47:06 AM

Buying a Home When You’re Self-Employed

Topics: Mortgages, NZ Mortgage Adviser, NZ Property Market, NZ Property, Low Doc Home Loan, Small Business Lending, first home buyer 0

Applying for a home loan when you’re self-employed – or have contract or seasonal work – can be tricky. But the good news is, there are still options available to you: A low-doc home loan allows self-employed business owners to apply for a home loan from a non-bank lender with minimal income verification. Read on to find out more about buying a home when you’re self-employed.

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Proving Consistent Income
As a self-employed contractor or business owner, proving your income and ability to meet repayments can be a challenge, particularly if your income fluctuates as is the case with seasonal work. In most cases, lenders require you to show the two most recent years' financials, and if you’re just starting out in your business that can be hard to do.

That’s not to say it’s the end of the road for your home ownership dreams if you are self-employed. There are several lenders in the market that offer more flexibility in how they assess income, with loan packages tailored specifically to meet the needs of the self-employed.

These loans are called low-doc or low documentation loans, because the lender accepts alternative forms of documentation to verify your income. For example, a low-doc lender may only require six months’ worth of bank statements compared to a bank requiring two years’ worth.

Low-doc Loan Features
As with most home loans, low-doc loans have a number of features and requirements. And while these types of loans do require less documentation than others, the application process is usually very similar. You will still need to show evidence that you are able to repay your loan through some form of income.

With more flexibility comes a slightly higher interest rate and it’s likely you’ll incur higher fees and rates with this type of loan, charged by the lender to offset the perceived risk of lending to you. However, you may still be able to choose between a variable or a fixed interest rate to suit your financial needs.

Applying For Finance
To be approved for this type of lending you may want to consider the following options if you don’t have a regular income:

• Apply with a guarantor to give the lender a guarantee that your loan will be repaid.
• A joint application where you and the other person are equally responsible for the loan.
• Have at least two years’ worth of tax returns.

A low-doc loan is often an option for borrowers who don’t meet traditional loan requirements: self-employed, contractors or small business owners. As with any type of lending though, it’s important you thoroughly research these types of loans to ensure they meet your needs. To find out more about low-doc home loans and whether you meet the requirements for this type of loan, get in touch with your Mortgage Express adviser.

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Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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