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Home Loans for the Self-Employed
Home Loans for the Self-Employed
Written by
Tina Sendin
Edited by
Andrew Kemp
Reviewed by
Sam HymanCompare home loans the easy way
We partnered with Aussie to help you compare home loans from over 25 lenders and over 2,500 home loan products.
Can I get a home loan if I’m self-employed?
Long story short
Self-employed? You can still get a home loan
Lenders may see self-employed borrowers as higher risk, but with the right financials, you can secure a mortgage.
Be ready to show your financial story
Documents like tax returns, BAS, and bank statements are key to proving your income stability.
Low doc loans offer flexibility but may cost more
If you lack traditional documents, low doc loans are an option, though they often come with higher interest rates.
Specialist lenders can be more flexible
Big banks prefer neat financial packages, but specialist lenders might offer better options for self-employed borrowers.
Can I get a home loan if I’m self-employed?
Yes, absolutely. Self-employed individuals can secure a new home loan even when they don’t receive traditional pay cheque from an employer. However, you may have to provide more documents than an employee to secure that loan.
Lenders tend to view self-employed individuals and business owners as higher risk than employees, which means they’ll likely need more evidence that you can afford your monthly repayments despite not having a fixed monthly income.
Lenders will see you as self-employed if you:
- own a small business or a large company (whether in a single proprietorship, partnership, company or trust)
- are a sole trader, freelancer or independent contractor.
Is it harder to get a home loan if you are self-employed?
It can be harder for self-employed people to get a home loan than employees, as lenders typically prefer certainty and predictability. When you work for yourself, cash flow tends to fluctuate, while employees enjoy a regular salary.
And – between rate hikes from the Reserve Bank of Australia (RBA) and stricter lending policies driven by updated Australian Prudential Regulation Authority (APRA) guidelines – lenders are likely to dig deeper into your finances in search of proof that you can handle repayments.
But guess what, you can still successfully land a mortgage. In fact, if you’ve got a strong track record – think consistent income, clean credit history, and at least a couple of years running your business – some lenders actually offer rate discounts or assess you much like they would any other potential borrower.
You just need to understand what lenders like to see (a mortgage broker or lending specialist can support you on this front) and know your options (we can help you compare home loans).
What do lenders look at when lending to the self-employed?
When assessing your application for either a mortgage or refinancing, lenders look for important information that prove your business is stable, profitable, and capable of supporting a mortgage long-term. They’ll also look into existing debts – say business loans, equipment financing, and credit card debt.
The eligibility criteria for self-employed applicants are stricter. For instance, you’ll likely need to show two years of financial records, compared to just two months of employee payslips. If you’re in industries like hospitality or construction, you might also get a few extra questions since they’re seen as higher risk.
What documents are typically required for a self-employed home loan application process?
If you’re self-employed, you’ll likely need to provide your lender a range of key documents that includes business financial statements, business registration details, bank statements, and Australian Taxation Office (ATO) statements.
Different lenders may have different requirements, but self-employed applicants typically need to prepare the following:
- business and personal tax returns (personal and business) for the past two years
- proof of business registration, i.e. ABN and GST details
- profit and loss statements
- balance sheets
- notice of assessment
- other financial documents as proof of expenses and business liabilities, e.g., depreciation, assets, write-offs.
If you don’t have any of the above, you’re not out of options! Some self-employed borrowers also use alternative income verification methods:
- business activity statements or BAS (some lenders accept two to four recent BAS)
- bank statements (both personal and business) that show steady deposits for 6–12 months
- a declaration letter from your accountant with details of your income and trading history
- previous PAYG employment income, especially if you started your business in the same field.
Helpful tip
As a self-employed hustler, you can secure a competitive mortgage. The key is in how you present your financial story. And there are things that can improve your chances of approval. Before you apply, make sure your numbers tell a clear story. Lenders don’t just look at how much you earn – they look for consistency and confidence in your income. How well you present and organise your documents can, in turn, could make them a bit more confident about how thoughtful you are with your finances, and your ability to manage your repayments.
A good mortgage broker or home loan expert who understands self-employment can be a gamechanger here, helping you tell your story in a way that ticks the right boxes.
Sam Hyman
General Manager – National Sales, Aussie
How can I improve my chances of approval?
Presenting yourself as a low-risk borrower could help improve your chances of approval, like showing you’ve got all your financial ducks in a row, you have a decent deposit amount set aside, and a strong credit score.
Separate personal and business finances
Keep your business revenue and personal expenses in entirely different bank accounts. Clear financial boundaries make it easier for lenders to assess your true income.
Boost your deposit size
Aim for the default deposit size of at least 20% of the property value. Doing so can help you avoid lenders mortgage insurance while also showing that you have strong financial discipline.
Show stable income
Lenders want to see regular, consistent deposits into a savings account. Show how your savings have grown each year and be ready to explain any big one-off expenses, like buying equipment. It can also help to include a letter from your accountant that sums up your overall financial position.
Improve your credit score
It’s worth thinking about your credit score several months before your application. You can help improve it by paying your bills on time, clearing outstanding debts, cancelling credit cards you don’t use, and avoiding applying for new ones (same goes for personal loans). These things could help improve your borrowing power, although of course good behaviour for a few months won’t be the silver bullet if the file shows a couple of defaults.
What are the suitable home loan options for self-employed borrowers?
When it comes to home loans for self-employed borrowers, options include choosing between a low doc or full doc home loan, and between variable, fixed-rate, or split rate home loans. Let’s dive deeper into these options.
What is a low doc home loan vs full doc home loan?
Different loans require different levels of documentation, with low doc loans requiring less and full doc loans needing more. Here’s how they stack up:
- Full doc loans: These are the standard option, where you provide a full suite of documents to prove your income – like two years of personal and business tax returns. If your financials are well-documented, this is often a very good choice as it typically comes with lower interest rates.
- Low doc loans: These are home loans for self-employed borrowers who might not have traditional documents like profit and loss statements. Instead, you can provide BAS statements, bank records, or an accountant’s declaration. While these loans offer flexibility, they’re often seen as higher risk, which means higher interest rates or lower borrowing limits.
Fixed vs variable vs split rate home loans
Fixed-rate home loans offer certainty, locking in your interest rates and repayments for a period, providing certainty at the cost of flexibility. Variable rates give you flexibility – especially if you want to make extra repayments, but that means both interest rate cuts and rises are usually passed on to you. Split loans divide your loan into two portions with their own fixed and variable rates – with the benefits and trade-offs of the first two applied to each chunk. Choosing between them will depend on your priorities.
It’s worth talking to a mortgage broker who can walk you through the pros and cons, especially because one type may offer various features (like an offset account and a redraw) the others don’t.
Specialist vs traditional banks
Big banks often want a tidy application package with two years of tax returns. If that’s not you, specialist or non-bank lenders could be more flexible and worth exploring. However, the latter might apply higher interest rates because of higher risk, so it’s worth shopping around for home loan options!
How long does pre-approval for self-employed loans typically take?
While the pre-approval process usually only takes up to five days for employees, self-employed applicants may have to wait longer if the lender conducts a manual review. Just keep in mind that the biggest holdups are usually missing or incorrect documents, so it’s worth double checking everything before you hit submit!
What should I consider when comparing home loans?
It’s worth comparing different lenders to understand their different requirements for self-employed individuals. For instance, some lenders might let you borrow more with a smaller deposit if your business has steady growth, your financials are well-organized, and you’ve got a strong credit history.
In fact, some lenders accept deposits as low as 10–15% from strong applicants, and others might offer better lenders mortgage insurance (LMI) for self-employed borrowers.
Thinking about comparing home loans?
If you’ve built a business and are now ready to buy your dream home, it’s worth taking the time to compare your home loan options carefully. With a slew of lenders and home loan options, plus the added mental load around a self-employed application, it can feel overwhelming. But it doesn’t have to be.
At iSelect, we make comparing home loans simple. Let us help you, so you can focus on what matters most – getting the keys to your new home. Start a comparison today.
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iSelect is the trading name of iSelect Mortgages Pty Ltd (ABN 86 148 217 181). iSelect Mortgages Pty Ltd is a credit representative (Credit Representative 400540) of Lendi Group Distribution Pty Ltd (Australian Credit Licence 246786). iSelect provides a referral to Lendi Group Pty Ltd, a Credit Representative of Lendi Group Distribution Pty Ltd (Australian Credit License 246786). iSelect Mortgages Pty Ltd receives a commission from Lendi Group Distribution Pty Ltd, the licensee for each new customer account created and for each home loan submitted through this service.