Self-employed home loans are designed for business owners, sole traders, freelancers and other borrowers whose income can be harder to verify than a regular employee (PAYG) salary.
Getting a home loan when you are self-employed does not necessarily mean you need two years of tax returns. Depending on the lender and loan type, your income may be verified using tax returns or alternative documents such as business activity statements (BAS), bank statements or an accountant's letter.
Yard offers home loans for self-employed borrowers and may consider applicants who have operated under an ABN for as little as six months, subject to credit criteria. This guide explains how self-employed home loans work, what documents you may need and the options available if you do not have up-to-date tax returns.
A self-employed home loan is a home loan assessed using the income and financial information of someone who works for themselves or owns a business.
This can include:
The loan itself may work much like any other home loan. The main difference is how the lender verifies your income and assesses your ability to repay the loan. As a non-bank lender, Yard can take a more flexible approach to income verification than some traditional banks. Self-employed borrowers may use a full documentation home loan or, where eligible, a low documentation home loan.
Self-employed home loans work by assessing your business income alongside your personal financial position to work out if you can afford to repay the loan.
Many lenders assess self-employed borrowers using tax returns and financial statements. Some lenders can also consider alternative income documents where traditional financial information is unavailable or does not reflect the borrower's current position.
There are two main ways a self-employed applicant may verify their income:
Eligibility and documentation requirements depend on the individual application and Yard's credit criteria.
If your tax return is not up to date, you may be able to verify your income using your Business Activity Statements (BAS), an accountant's declaration or business bank statements. For many self-employed borrowers, a low doc home loan uses these alternative forms of income verification in place of full tax returns.
A low doc home loan offers an alternative approach to income verification for self-employed borrowers. It does not mean you can borrow without showing you can afford the repayments. Your income, expenses and overall financial position are still assessed as part of the lending process.
This is particularly relevant if you are thinking:
"My tax return doesn't show what I earn now."
or:
"I haven't lodged my latest tax return yet. What else can I use?"
If your paperwork is out of step with your current circumstances, a Yard Loan Consultant can help you understand what income evidence may be available to you.
Many lenders prefer borrowers to have two years of self-employment history, but requirements vary between lenders. Yard may consider self-employed borrowers who have been operating under an ABN for at least six months.
For borrowers with a shorter trading history, Yard reviews factors such as previous experience in the same industry and evidence of the business's current income. Having a shorter ABN history does not automatically mean an application will be declined.
The documents required for a self-employed home loan depend mainly on whether you apply using full documentation or low documentation.
A full documentation application generally uses full financial and tax records to verify income.
Depending on your business structure, documents may include:
Two years of financial information may be requested depending on the application and loan requirements.
A low doc home loan allows eligible self-employed borrowers to verify income using alternative documentation.
Yard may accept evidence including:
The documents required will depend on the application and Yard's credit criteria. For more detail, read our guide to the documents needed for a low doc home loan.
Yes, lenders like Yard may consider a self-employed home loan application where the applicant has been operating under an ABN for at least six months.
A shorter trading history can require the lender to look more closely at the circumstances of the business. Relevant industry experience, current income and the overall financial position may form part of the assessment.
This can be particularly relevant for someone who has recently become self-employed after working as an employee in the same field.
Lenders assess self-employed income by reviewing the income generated by the business and making adjustments according to their lending policy.
For a full doc application, this may involve reviewing tax returns, financial statements and taxable income across previous financial years.
Some business expenses may also be considered as add-backs when calculating assessable income if the lender determines they do not represent an ongoing cash expense.
Depending on the circumstances, examples may include:
The treatment of add-backs differs between lenders and applications, so an expense adjustment should not automatically be assumed to increase borrowing capacity.
Variable income is common for self-employed borrowers, so lenders may assess more than one financial year when determining usable income.
Some lenders may use an average of the previous two years or place greater weight on the lower income year. Other lending policies may allow recent business performance to be considered differently where there is sufficient evidence to support the income being used.
This is one reason the lender's self-employed income assessment policy can matter as much as the advertised home loan rate.
There is no single best home loan for every self-employed borrower in Australia. The most suitable loan depends on your trading history, income documentation, business structure, deposit, property and overall financial position.
For example, a borrower with two years of completed tax returns may be suited to a full doc home loan. Someone with a strong business income but without current tax returns may instead need a low doc home loan.
When comparing self-employed home loans, consider:
Consider a borrower who has worked as an electrician for eight years but only started operating their own electrical business nine months ago.
They have:
A lender that requires two full years of self-employment history may not be able to assess the application using its standard lending policy.
Yard may be able to consider the borrower because they have been operating under an ABN for more than six months. Instead of relying only on two years of tax returns, the application may be assessed using alternative income evidence, such as BAS, bank statements or an accountant's letter.
Their previous experience as an electrician may also help demonstrate continuity between their previous employment and their new business.
This does not mean the loan would automatically be approved. Lenders like Yard would still assess the borrower's income, expenses, liabilities, credit position, deposit or equity and the property being purchased or refinanced. A borrower who has recently become self-employed may still have home loan options even if they do not yet have two years of business tax returns.
Yard offers self-employed home loans for borrowers with different income structures and levels of documentation, whether you are buying or refinancing. Depending on your circumstances, we may be able to consider a full doc or low doc application, including alternative income evidence such as BAS, bank statements or an accountant's letter. We can also consider eligible borrowers who have been operating under an ABN for as little as six months, subject to Yard's credit criteria. You can start with our online application or use our borrowing power calculator to get a sense of what you may be able to borrow. To talk it through, speak with a Yard Loan Consultant about your circumstances and the documents you have available.
Sole traders can prove income using tax returns and ATO Notices of Assessment for a full doc home loan. For an eligible low documentation (low doc) loan application, Yard may consider alternative evidence such as BAS, bank statements or an accountant's letter.
Requirements vary between lenders. While many lenders prefer around two years of self-employment history, Yard may consider sole traders who have operated under an ABN for at least six months, subject to credit criteria.
Yard may consider applicants who have operated under an ABN for at least six months. The application will still be assessed based on income, industry experience, financial position, property and Yard's credit criteria.
Working with a self-employed home loan specialist like Yard gives you a distinct advantage. We handle high volumes of complex income scenarios and know how to navigate your unique financials.
A Yard Loan Consultant will review your circumstances and current documentation to determine whether a full doc or low doc loan is right for you.
A full doc home loan generally verifies self-employed income using tax returns and financial statements. A low doc home loan can use alternative income evidence, such as BAS, bank statements or an accountant's letter, for eligible borrowers.
No, It can require more documents. A salaried applicant may only need payslips, while a self-employed applicant may also need tax returns, financial statements or BAS. Being self-employed does not prevent you from getting a home loan. The available options depend on your trading history, income evidence and financial circumstances. It is recommended to speak to a self employed lending specialist like Yard who has the expertise to help complex lending scenarios, offering a simplier pathway for business owners.
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