Buying a home when you are self-employed
Being your own boss is exciting and offers a high level of satisfaction. You run the ship and can decide when and how you work and have control over your income. However when it comes to getting a mortgage, it can prove a little trickier.
No matter whether you are a sole trader, in partnership, or a contractor or freelancer, being self-employed doesn’t come with the same certainty that salary and wages does. Self-employed income can fluctuate greatly depending on business turnover, and therefore it can be harder to prove a consistent income. While you know that you can pay your mortgage, lenders like to see consistency and the main way they measure this is through your income. This is why as a self-employed business owner, proving your income to a lender is one of the biggest parts of a successful loan application.
Of course if you are on a salary or hourly rate, this is easy - just show your lender your payslips or show the regular payments from your employer going into your bank account. When you are self-employed, you need to rely on your business’s financial documents as your proof of income. These are your financial statements and yearly returns. Generally banks like to see two full and consistent years of income before they will lend, however there are times that this isn’t possible. For example if you have been in business for less than two years, or your business has faced challenges or inconsistent income over that time. If this is the case, then never fear there is still hope. There are alternative non-bank lenders who often have less strict criteria than the banks, and who will often take on self-employed borrowers. These lenders are generally more flexible, and when you work with us you know you are being placed with a lender that you can trust. In the past non-bank lenders had high interest rates and fees, however this isn’t so much the case now, with many non-bank lenders being on par, or just fractionally higher, than banks.
Another thing lenders take into consideration is the amount of deposit you have. If you have a generous deposit, you will be looked upon more favourably than someone with a lower deposit, even if you have the same income. The more you can put towards your deposit, the better your application will look, so we work with you to help you tap into all available money sources including Government assistance and KiwiSaver.
If you are self-employed and are considering buying a property, then we encourage you to get in touch sooner rather than later. We can help you look over your income and your business finances and offer advice around what you may need to do or provide to look as attractive to a lender as possible. Within our team we have a number of ex-business banking Senior Managers, so we know exactly how the banks think and what they are looking for. This allows us to know how to present your application in the best possible light. As we have access to New Zealand’s widest panel of banks and lenders, we can also offer up the best options for your individual situation. If you are keen to take that next step, then talk to the experts and let our Canterbury based mortgage advisors help you meet your financial goals. Call us or book online today for your free no-obligation chat around how we can support you into your new home.