Why Banks Make It Hard for Self-Employed Borrowers
Banks assess home loan applications using a standardised income verification process designed around PAYG employees, people who receive a consistent payslip from an employer. Self-employed income is different: it's variable, often paid into a business account rather than a personal one, and typically reduced by business expenses on tax returns.
This is why a self-employed person earning $150,000 per year might show a taxable income of $80,000 after legitimate deductions, and why the bank's calculator says they can't afford a loan their employed neighbour on $100,000 has no trouble getting.
The solution isn't to change how you run your business. The solution is to use a broker who knows which lenders look beyond the tax return.
Types of Home Loans Available to Self-Employed Australians
Full Doc Home Loans
Available if you've lodged your last two years of tax returns and your taxable income, after deductions, is sufficient to service the loan. These attract the best rates and the largest choice of lenders, including the major banks.
If you can qualify for a full-doc loan, this is generally the best option. However, many self-employed borrowers either haven't yet lodged recent returns or have significant deductions that reduce their stated income.
Low Doc Home Loans
The most important product for self-employed Australians. Instead of tax returns, lenders accept alternative income evidence:
- An accountant's letter or declaration of income
- A signed self-declaration of income
Low doc home loans typically require a larger deposit (20% or more in many cases) and carry interest rates 0.5% to 1.5% above standard rates. However, they provide a genuine path to property ownership for people the mainstream market excludes.
Alt Doc (Alternative Documentation) Loans
Similar to low doc but with more flexibility around which documents are accepted. Specialist non-bank lenders often offer alt-doc products with more creative approaches to income verification, useful for businesses with strong cash flow that isn't easily reflected in standard documents.
For low doc loans where the deposit is less than 20%, LMI is typically required. This adds to the cost of the loan but allows you to enter the market sooner. Some lenders waive LMI requirements for certain professions or loan sizes, your broker can advise.
What Self-Employed Borrowers Need to Qualify
Requirements vary by lender and loan type, but here's what most self-employed home loan applicants should be able to provide:
Minimum Requirements (Low Doc)
- Active ABN registered for at least 12–24 months
- Rates Notice (council rates or water rates)
- Photo ID
- 20%+ deposit (for most low doc lenders)
- Good credit history (some lenders accept minor issues)
Stronger Application (Better Rates and Terms)
- GST registration
- 2+ years of ABN history
- Clean personal credit file
- Accountant's letter confirming income
- Existing assets (savings, superannuation, other property)
How Much Can You Borrow?
Borrowing capacity for self-employed applicants is calculated differently depending on the lender and loan type:
- Full doc lenders use your taxable income from the last 1–2 tax returns, sometimes averaging them
- Low doc lenders use your declared income (which you self-certify or have an accountant certify), typically up to a stated maximum
- Bank statement lenders assess your average monthly income based on deposits over 12–24 months
The right lender choice, made by a specialist broker, can make a significant difference to how much you're approved for and at what rate.
The Deposit: What Self-Employed Buyers Need
Most low doc lenders require a minimum 20% deposit to avoid LMI. Some may go as low as 10–15% with LMI. The higher your deposit, the more lenders are available to you and the better your rate will be.
Importantly, your deposit doesn't have to come entirely from savings. Existing equity in another property, a gift from family, or business assets may also be considered depending on the lender.
Improving Your Chances of Approval
If you're planning to apply for a home loan as a self-employed borrower, here are things you can do now to strengthen your position:
- Make sure your ABN has been active for at least 2 years before applying
- Keep personal and business finances separate, lenders like clear income trails
- Avoid large unexplained withdrawals in the 3–6 months before applying
- Check your credit report and resolve any disputes before applying
- Lodge outstanding tax returns if possible, even older ones help establish income history
- Save consistently, a growing savings pattern is a strong signal to lenders
Why Use a Broker for a Self-Employed Home Loan?
A specialist mortgage broker with ABN experience knows which lenders actively want self-employed borrowers and which ones will waste your time. Going directly to a major bank often leads to rejection, and each rejection leaves a mark on your credit file.
At Mates In Finance, Adam works exclusively with ABN holders and self-employed Australians. He knows the nuances: which lenders have the best rates for borrowers with 2 years of ABN history, which ones accept accountant declarations as income evidence, and which ones can move quickly when you've found the right property.
Free consultation, no obligation. Visit matesinfinance.com.au or call 0484 137 550.