It is not impossible for the self-employed to get a home loan – but it isn't easy either.

Taxable income declared by self-employed people is often reduced, as accountants look for as many tax deductions as they can achieve. Another problem is the sheer volume of paperwork the self-employed person must present to meet evidence requirements.

The good news is that a number of innovative lenders have emerged in recent years and these take a simpler approach than has been taken by lenders in the past.

At TCHL we can offer you either a “standard” loan or a “lo-document” loan depending upon your specific circumstances and the amount of financial information you have available to support you loan application. If your financial information is up to date, including having your current year’s tax returns being lodged, you would apply for a “standard” loan. If your financial information isn’t up to date you may choose to apply for a lo-document loan

Getting help from an expert

We recommend that professional help be sought from the outset. The complexities of structuring home loans for the self employed usually mean that you need an expert to put it together.

Your Mortgage Broker arranged by TCHL will know which lenders apply which rules; which lenders will use the latest year’s figures if they’re better than the year before, instead of averaging; and which lender will use one year’s trading instead of two. Also, they’ll know which lenders will add depreciation and other non cash-flow items back into income.

Many lenders offer standard and premium lo-document products with the choice of fixed or variable interest rates. This means that self-employed people can choose between a basic loan with a low interest rate, a loan with more transactional features and a higher rate of interest or a line-of-credit loan with all the bells and whistles.

To qualify for a lo-document loan, most lenders require you to self-certify your income and demonstrate a clean credit history.

Pros and cons

With less documentation, obtaining a loan is faster due to the streamlined application process. And while interest rates may be higher than a standard loan, you may be able to transfer to a full-doc loan with a lower interest rate, and at no cost, once you can provide the traditional forms of income verification.

However, there may be limits on the amount you can borrow (ranges from 60 to 80 per cent of the value of the property). You may also have to pay lender’s mortgage insurance, adding to the cost of the loan.

Having trouble finding the right loan? Don’t despair. Today, many lenders offer alternatives for self-employed people and others with no traditional proof of income.