How long do I need to be self-employed for?

The majority of low doc lenders will ask that your ABN has been registered for at least 2 years. They may also require that you're registered for GST. Of course, there are still some lenders around that will accept applications from self-employed people who have only been in business for between 1 and 2 years. The bank will generally want to see records from your accountant outlining your income and expenses, and they may want to see evidence of your income prior to starting your new business.

What if I've been self-employed for under a year?

There aren't as many lenders around that will approve a self-employed home loan application if you've been in business for less than 12 months, but it's not impossible to get a home loan. For example, if you've been self-employed as a sub-contractor electrician, but you were employed in the same line of work for someone else for 5 years before that, you could still be considered simply because you're still doing the same work. It may also help you gain loan approval if you're applying for the loan together with a PAYG regular income earner.

How do lenders calculate my income?

When you provide a full set of financial documents to your lender, it doesn't just look at the most recent years' taxable income. Most will add together 2 years' income and then average them out to give them a figure to work on. This can often reduce your actual income, which also reduces the amount you can borrow. Other lenders may decide to take the lower figure of the 2 years and run with this. Of course, there are some lenders that will actively try to add back some of the write-offs shown in your tax returns onto your taxable income figure. This might include any depreciation on business vehicles or investment properties and even any additional superannuation contributions you made throughout those years. It might also include adding back any once-off losses noted.

How much can I borrow on a low doc home loan?

Most lenders limit the amount that you're able to borrow based on the property value and the amount of income they're able to verify for you. In most cases, low doc applications are limited to 60% of the property value, although many lenders will increase this up to 80% with a Lender's Mortgage Insurance charge added for any LVR over 60%.