As we alluded to in last week’s newsletter, those lenders who hadn’t past on the rate cut by this time last week will have done so by now, and that is certainly the case.
A few interesting things of note with this round of changes –
- Pepper money reduced their variable rate by 0.55% which is obviously a lot more than the change made by others
- ING reduced their 1 year fixed rate for the second week running
- Most lenders now have their 1 year fixed rate below their discount variable rate which generally suggests they believe that the RBA will cut the cash rate again
In this week’s newsletter, we take a look at the nuances associated with getting a home loan if you’re self-employed, and how specialist lenders are able to help out.
Securing a home loan as a self-employed borrower comes with additional challenges compared to traditional PAYG applicants.
While self-employed individuals often have strong earning potential, their income is typically more variable, leading lenders to apply stricter assessment criteria. This is where specialist self-employed lenders play a vital role.
Key Differences
Income Verification: Instead of providing standard payslips, self-employed applicants must submit business financials, tax returns, and profit & loss statements (usually for the last two years).
Lenders often use an average of the last two years’ income or take the lower figure if income fluctuates significantly.
Higher Scrutiny of Financial Stability: Lenders assess the consistency of income to determine serviceability. Irregular cash flow, business expenses, and tax deductions can make income appear lower than it actually is.
Loan-to-Value Ratio (LVR) and Deposit Requirements: Self-employed borrowers may need a larger deposit (e.g., 20%) or pay Lenders Mortgage Insurance (LMI) if borrowing with a lower deposit.
Some lenders may cap the maximum borrowing amount due to perceived risk.
Additional Documentation: Tax returns, Business Activity Statements (BAS), bank statements, and even accountant letters may be required.
Some lenders request evidence of business longevity, usually requiring at least two years of operation.
How Specialist Self-Employed Lenders Can Help
Specialist lenders offer tailored loan products for self-employed individuals who may struggle to meet strict bank criteria. They provide:
✔ Low Doc Loans – Require minimal financial documentation, often using BAS statements or accountant declarations.
✔ Flexible Income Assessment – May consider recent business performance rather than two years of financials.
✔ Higher LVR Options – Some specialist lenders approve loans with as little as 10% deposit.
✔ Faster Approvals – With more streamlined assessments, approvals can be quicker than traditional banks.
For self-employed borrowers, working with us can help navigate lender requirements and access loans that align with their financial situation.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
