Being self employed has many benefits, but when it comes to borrowing money for a home it can prove to be a difficult process.
Why is this so? How can you get around the hurdles? Lenders tend to be conservative when it comes to the self employed, the main issue being the amount of taxable income declared. Many lenders will perceive the income to be wages drawn plus any business profit. Deduction of expenses creates an illusion of a lower taxable income than is the true position. For example, business use of motor vehicles, home office rental and percentage portions on home phones and utilities need to be taken into account.
Instead of just supplying pay slips and group certificates, the self employed will need to show personal tax returns for the past two years as well as financials for the business for the past two years. Many lenders will take an average of the two years which for young companies can have a negative impact on the amount they are able to borrow. Another common problem arises when you are half way through the financial year and tax returns for the previous year are yet to be completed.
If you want to borrow for a home loan or investment property and you are self employed, please contact the office. It is important to know which lenders apply which rules.
