Having a mind-numbing talentless day-job just so you can make some money to afford stuff is super easy. If you want a real challenge in your life, however, self employment is the way to go. Being your own boss can be a really rewarding experience, but it also means that you have to do everything yourself and you have to work hard if you want to be successful.
The thing is, when you are self employed, there are so many details you need to get right and that is especially important when you want to get self employed home loans. The main difference between getting self employed home loans and getting a loan with a regular job, is that banks find it more complicated to work out whether you can afford to pay your mortgage in the future. This is because a pay-as-you-earn borrower can show their income simply by providing a payslip, while a self employed person has a much more complicated financial situation because there is no certain income and the bank has to look at profit and loss statements since it is their legal responsibility to make sure that the borrower can afford the payments.
Although many self employed business owners have a solid cash flow, very often they don’t have all the right paperwork that truly reflects their current financial position. However, there are a number of solutions for this problem, but you will need to do a little homework. Here are some tips that can be helpful regarding self employed home loans.
First of all you need to carefully consider your options and go for the best offer available. Although most people intuitively go to the same bank where they have their savings or business account, that is not usually your best choice. This is mostly because banks are counting on that convenience factor and since they don’t have to try and win you over, you won’t get the best loan offer.
As I mentioned before, keeping your financial information updated is very important for the bank to asses your situation. Keep all your paperwork from the last two years updated and ready. Things such as financial statements, income tax returns and notice of assessments.
You also need to understand how you are being assessed. Banks use various methods for assessment of self employed people. Some banks may consider your average income for the past two years, while others might use the lower income.
Also, make sure you confirm that you really fall in the self employed category. Often contractors or sub-contractors can get away buy being considered as employees with some lenders.
And, of course, you can always rely on experienced and highly skilled lending managers to make an assessment of your income and determine what loan is right for you.