Has your lender asked for an accountant letter to prove your ability to repay a home loan? Here’s what you need to do to get your loan application approved.
In order to assess your ability to repay a mortgage, during the application process a lender might ask you to supply a letter from your accountant. This letter is used to provide confirmation that you will be able to afford the loan you’re applying for without experiencing any financial hardship, and that you will be able to make on-time repayments towards your debt.
Accountant letter template
Copy the below template if you need an accountant letter for a home loan.
To whom it may concern,
Re: John Smith Home Loan Application
I am aware that John Smith has applied for a loan of $500,000 through Bank A. The repayments on this loan require monthly instalments of $2,100 over a 30-year loan term at a variable interest rate of 5.25% p.a.
Based on my knowledge of Mr Smith’s income and expenses, I deem him capable of being able to afford this loan and believe that he is in a strong financial position to make his loan repayments on time.
To the best of my knowledge, there are no significant factors that would hamper his ability to service this loan.
I can confirm that Mr Smith is an Australian taxpayer and is registered with the Australian Taxation Office (ATO). I can also confirm that I submitted his most recent tax return to the ATO for assessment.
Should you require any further information, please do not hesitate to contact me on (XX) XXXX XXXX.
Mr Jack Accountant
Why will my lender ask for an accountant letter?
Banks and other lenders may ask for an accountant letter to clarify any potential issues on your loan application. This will ensure that the lender fully understands your financial situation and can assess your loan application accordingly.
For example, if you’re a self-employed borrower and you can’t provide proof of income, a lender might ask for an accountant’s letter certifying that you have sufficient income to service a low-doc loan.
There are several reasons your lender may request an accountant letter, including:
- To verify your income
- To request more information about your assets and liabilities
- To confirm the purpose for which you will use the loan funds, for example that the loan will primarily be for business use
- To confirm any changes in details, for example if you have changed your ABN
- To clarify any changes in your income, for example due to one-off expenses or other mitigating circumstances
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Requirements for accountant letters
Most Australian lenders have fairly similar requirements for accountant letters. Some lenders will offer their own templates and we’ve included our own sample letter below, but as a general guide the letter from your accountant will need to include the following:
- The accounting firm’s letterhead
- The accounting firm’s contact details and ABN
- Details of CPA qualifications and other industry memberships
- The date
- Your accountant’s signature and printed name
- The name of the borrower (you) and, if applicable, your company
- Confirmation that the firm acts as your accountant
- Information that addresses the reason why the lender has requested an accountant letter
This letter can typically be faxed or emailed to your lender, although some lenders will request that your mortgage broker keeps the original copy of your accountant letter on file.
Including a disclaimer
Most accountants will require this letter to include some sort of disclaimer before they will sign it for you. This disclaimer is designed to protect them from legal action if you end up getting into financial trouble while repaying your loan.
The exact wording of this disclaimer is up to your accountant, but it basically explains that the information contained in the letter is based on rigorous enquiries with you, and is true to the best of their knowledge. It then concludes that the accountant accepts no liability regarding the accuracy of the information in the letter or any loss you may incur.
Finalising your application
An accountant’s letter is becoming an increasingly common part of the borrowing process with many Australian lenders, so don’t be alarmed if a lender requests this type of document from you. It’s your accountant’s job to act in your best financial interests and, under the National Credit Act, they have a responsibility to ensure that you do not apply for a loan that is unsuitable for someone in your financial situation.
And if you have the financial capacity to service the home loan in question, an accountant letter is a crucial piece of documentation that will greatly improve the chances of your application being approved.