Lending for those who are Self-employed
Owning your own business is exciting; you have control over how much you earn and what hours you work and seeing your business grow is incredibly satisfying. But being your own boss does not come with quite the same financial security that salary and wages does. Income can fluctuate greatly depending on your business's turnover, and COVID has made that all the harder over the past couple of years.
When it comes time to getting a mortgage, being a business owner means that you must work a little harder to ensure you look an attractive prospect to a bank. Banks like to see consistency, and to feel confident that you have the ability to repay the loan, and on time. When it comes to lending for business owners, proving your income is solid and consistent can often be the biggest hurdle.
When you are a salary and wages earner, it’s simple to prove your income via a copy of your pay check or regular income as shown on your bank statements. For these borrowers, 3 months is often enough to prove regular income. For those who are self-employed, proof needs to come in the form of annual financial statements and returns. Banks often like to see the last two years of financial statements and see that they provide a stable and solid income.
For those that haven’t been in business for two years or their income has been inconsistent due to the tough economic climate we find ourselves in, then looking at an alternative lender could be an option. There are many lenders here in New Zealand and here at Element Financial, we have access to many of them. While many people think of banks as the only lenders, there are also a wide range of non-bank lenders to choose from. These lenders do not fall under the same strict criteria as banks and are often much more flexible in their offerings. Many of them also have similar rates and costs to traditional bank lenders.
Having the best deposit possible is something that will also help you appear attractive to a bank or non-bank lender. The larger your deposit, and less loan you need, the higher chance you have of getting finance. For example, someone who has a 40% deposit has a better chance of being pre-approved than someone who has the minimum 20% deposit, if both have the same income.
As soon as you decide it is time to buy, we recommend coming to have a chat. We can have a look over your self-employed income and financial returns and offer you the best advice on your situation. Thanks to our broad range of lenders, we can also work out the one who is most likely to offer you finance and go from there. Contact Jonty today on 027 619 4106 and let’s talk.