Home Loans for the Self Employed

Running your own profitable business is difficult enough without the hassles of applying for a home loan. If you are self-employed, you may be denied a traditional home loan due to lack of paperwork to verify your income.

The alternative is to apply for a lo-document home loan (often called low doc loans). Low doc home loans are specifically designed for self-employed people and other non-conforming borrowers.

Range of products

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, many 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 full documentation 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.

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David Carruthers is a credit representative (Credit Representative Number [400226]) of BLSSA Pty Ltd (Australian Credit Licence No. 391237).