Attention Business Owners! If you’re struggling to get finance to buy your home or an investment property, I’m about to give you 8 tips for getting a mortgage when you’re self-employed.
Tip #1: Know Your Numbers
You need to know your numbers. Anyone in business should know their numbers anyway but it is especially important if you’re going to apply to the bank. To get a mortgage, you need to understand the profitability of the business and understand how your numbers stack up. In order to do this, you need to be working with your finance broker and your accountant to make sure the bank likes what they see.
Tip #2: Get a Finance Broker
Make sure you have a finance broker in your corner. You need someone who understands how banks assess self-employed borrowers. We know that there are over 60 lenders in Australia. Hence, they all have different ways of assessing somebody’s income. Now, when you’re self-employed the complexity increases again by another layer. That is why you need to work with a finance broker who specializes in self-employed borrowers. They know how to get the money from the banks when you’re in business.
Tip #3: Establish your borrowing power
Don’t go out there looking for a property if you haven’t got a pre-approval in place yet. Speak to a finance broker before you go out there into the wild world of Real Estate. They’ll help you understand how much you can borrow and how the banks are going to assess your income.
Tip #4: Know Your Eligibility
Make sure that you’d know your eligibility for securing finance before you go and buy a property. This is important especially if you’re a business owner, you need to make sure that you’ve got a legitimate pre-approval in place. Banks check everything. You need to make sure they like what they see on your numbers. So, they’ll be happy to lend you the money you need to finance your home or property investment.
Tip #5: Provide Proof Of Your Income
What does this mean? Typically when you’re self-employed the banks want to see two years worth of tax returns of financial statements for your business. They want to understand the health of the business. They want to see any liabilities that the business has and how much you take home personally from the business. Now, this is where it gets really interesting. This is where you need to work with a specialist. Because every single bank has a different policy on how they will assess a business owner’s eligibility for borrowing money.
Tip #6: Your Income Must Be Consistent
Your income needs to be consistent. As a business owner, we know with PAYG employees most people earn the salary they own the same amount every month. When you’re in business, you should be doing the same, paying yourself a fixed amount of income every single month. Further to that over long periods of time, you want to show consistency in the profitability of your business for years. This makes things really comfortable. It helps you when you want to go borrow money if you can show consistent profits as a business owner.
Tip #7: Get a good accountant
When you’re in business or you’re self-employed, the numbers need to look right for you to be able to borrow money from the banks. An accountant, especially one who understands this, is going to be super important taking away all your income to minimize the amount of tax you pay it’s not a very good idea because when the time comes together with the bank they’re going to say you’ve got no income and they’re not going to lend you a single cent.
Tip #8: Your Business Must Be Healthy
Make sure your business is doing well. This is probably the most important tip out of all 8 of them. As a business owner, being able to borrow money to buy a home or to buy an investment property is super important. But it is even more important to make sure you are running a healthy profitable business consistently. So if you don’t know your numbers in your business, the number of profits you are earning and you don’t the amount that you’re taking home every single month that is a really big concern for me. So you need to make sure that you wanna stay in the business and you know the business is working well.