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Home loans for sole traders

Sole traders may face a more complicated task in getting a home loan, but there are plenty of lenders who can help.

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Working for yourself can be a dream job for many Australians, but the dream can seem a bit less rosy when it comes time to secure a home loan.

While PAYG employees have an easy time proving their income, sole traders/proprietors face a more difficult task. Fortunately, there are home loan products and lenders that specialise in helping self-employed people achieve their property goals.[/fin_hide]Before you apply for one of these specialised home loans, you'll need to ask yourself several questions.

Will lenders consider me a sole trader?

If you're a sole trader, it means you've established a business for which you are individually and legally responsible. You'll have accountability for all aspects of the business, which means there is no partner with whom to share losses or debts.

If this is the business structure you've chosen, lenders are likely to consider you a sole trader or proprietor. This means you may need a specialised home loan known as a low documentation (or low doc) loan. These loans require alternative means of documentation to verify your income.

However, if your business involves mostly contract work, some lenders will still assess your home loan application as though you're an employee. This can make the process significantly easier. If you're a contractor or sub-contractor, ensure you check with your lender whether you'll be considered a sole trader or an employee.

Learn more about low doc home loans

Compare low doc loans for sole traders

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Loan purpose
Offset account
Loan type
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Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Aussie Activate Prime Alt Doc Home Loan - Up to 55% LVR Standard Rate
3.69%
3.72%
$899
$15 monthly ($180 p.a.)
55%
Pepper Money Essential Prime Alt Doc Home Loan - LVR up to 55%
3.85%
4.04%
$599
$10 monthly ($120 p.a.)
55%
A competitive rate home loan with an offset facility for self-employed borrowers.
Aussie Activate Prime Alt Doc Home Loan - >70% up to 75% LVR Plus Rate
4.19%
4.22%
$899
$15 monthly ($180 p.a.)
75%
Pepper Money Easy Near Prime Alt Doc Home Loan - LVR 65% to 70%
4.44%
4.74%
$995
$15 monthly ($180 p.a.)
70%
A competitive rate offered to low doc borrowers.
Pepper Money Advantage Specialist Alt Doc Home Loan - Standard LVR 70% to 75%
6.34%
6.64%
$995
$15 monthly ($180 p.a.)
75%
A competitive rate offered to those who are self-employed.
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Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

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The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)

Will I get approved?

An approved mortgage being stamped.Sole traders can face stricter criteria when it comes to the amount of documentation they need to provide. Many lenders see self-employed individuals as riskier borrowers due to potential income instability.

The longer you've been running your business, the better your borrowing position and two years tends to be a minimum requirement. Not only does this allow a lender to better assess the income you're likely to receive in the future, it also demonstrates your business stability. Many lenders expect you to have been running your business for at least two years.

If you've been a proprietor for less than two years, you may face difficulty getting approved. However, if you've worked in the same industry for some time, some lenders may be willing to accept a shorter tenure running your own business.

Aside from the length of time you've spent trading, you'll also face all the normal credit criteria that comes along with qualifying for a home loan. This means you need to be current with all your bills and debt obligations, and you need sufficient income to meet your home loan repayments.

Lenders assess a sole trader’s income differently than that of PAYG employees. Since your income can fluctuate, lenders are likely to calculate your earnings through one of several methods:

  • The income from the most recent tax year
  • The lower income from the last two tax years
  • The average income from the last two tax years

In addition, some lenders will add back expenses you incurred that reduced your taxable income. These could include:

  • Lump sum or voluntary super payments
  • Depreciation
  • One-off business expenses
  • Lease expenses
  • Interest on business or loans used for property investment
  • Company car expenses
  • Office rental expenses

How much can I borrow as a sole trader?

Sole proprietors may face stricter requirements when it comes to the deposit amount they require. If you have to apply for a low doc loan, you may need a deposit as high as 40%. However, some lenders will loan up to 95% of the value of the property you're buying, depending on the type of income documentation you can provide.

What documents do I need?

There are a variety of ways that sole traders can validate their income. Most lenders may want to see documents such as:

  • Last two years' tax returns
  • Profit and loss statements
  • Business Activity Statements for last 12 months (BAS)
  • Accountant's letter declaring your income
  • One year of business transaction account statements

You also need all the usual documents for any home loan application, such as:

  • Identification documents
  • Proof of income documents
  • Asset and liability documents
  • Extra documents (for guarantors, bad credit borrowers and other unique cases)

Learn more about the documents you need for a home loan application

What interest rate can I expect?

Some low doc loans mean higher-than-average interest rates. However, if you are able to provide ample income documentation, it may give you leverage to negotiate a lower rate.

Some low doc loans also come along with higher lenders mortgage insurance (LMI) premiums. LMI is an insurance policy that covers your lender in the event that you default on your home loan. Most lenders charge LMI premiums for loans of more than 80% of the property value whereas low doc loans may require LMI for loans exceeding 60% of the property’s worth.

Being a sole trader may make getting a home loan slightly more complicated, but there are plenty of lenders out there willing to help self-employed borrowers. You can work for yourself and still find a home loan that works for you.

Compare home loans from across the market

A mortgage broker can help you get a mortgage in unique circumstances and guide you through the application process

Aussie Home Loans Logo

Enter your details and get a free consultation with an expert broker from Aussie.

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)

Image: Shutterstock

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