Being your own boss has plenty of perks – but when it comes to getting approved for a home loan, things can feel a little more complicated. Unlike traditional employees, self-employed Aussies don’t always have the luxury of a regular paycheck or neatly packaged payslips. Instead, you’re juggling invoices, tax returns, business expenses – and possibly a few raised eyebrows from the bank.
But here’s the truth: getting approved for a home loan when you’re self-employed is absolutely doable. Yes, lenders will ask for more paperwork. Yes, they’ll dig a little deeper into your income. Self-employed individuals must take a few extra steps to assure lenders of their ability to service the loan, which includes providing more detailed financial documentation. But with the right prep – and a solid understanding of what they’re looking for – you can be just as home-loan-ready as any 9-to-5 worker. In this guide, we’ll walk you through how self-employed home loans work and how to give yourself the best shot at getting approved.
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Introduction to Self-Employed Home Loans
Navigating the world of home loans can be tricky for anyone, but it can feel especially daunting if you’re self-employed. The good news? There are plenty of loan options available to you, whether you’re looking at low doc loans or full doc loans. The key difference lies in the documentation you’ll need to provide. Unlike traditional employees, self-employed borrowers must demonstrate their income and financial situation through financial statements, tax returns, and other relevant documents.
Lenders often view self-employed borrowers as higher risk due to the unpredictable nature of their income. This means you might need to jump through a few extra hoops, and you could face higher interest rates. However, these loans can be used for both residential and investment purposes, giving you the flexibility to choose between fixed rate or variable rate loans based on your needs.
Understanding the landscape of self-employed home loans can help you prepare better and increase your chances of approval. So, let’s dive into the specifics of what you’ll need and what to expect.
What Is a Self-Employed Home Loan?
Definition: Despite the name, there’s no special loan product just for self-employed borrowers. You’re still applying for the same home loans – fixed, variable, or split. The difference lies in how your income is assessed. Instead of simply submitting payslips, you’ll need to provide tax returns, business financials, or other documents that show your income is consistent and sustainable.
Self-employed applicants are usually:
- Sole traders working under their own name or ABN
- Company directors who run their business through a corporate structure
- Partnership members with shared ownership of a business
- Freelancers and contractors earning income from multiple clients or short-term contracts.
Who Offers Home Loans for the Self-Employed?
While the big banks – like the Commonwealth Bank, ANZ, Westpac, and NAB – do lend to self-employed borrowers, their criteria can be strict. You’ll often need two full years of tax returns, strong credit, and a healthy deposit to get through the door.
If you don’t tick every box, you may find more flexibility with specialist lenders. Providers like Pepper Money, Liberty, and Bluestone offer flexible options for borrowers who don’t tick every box – like those with only 12 months of ABN history or incomplete financials. These lenders often have different credit criteria, making it easier for non-traditional applicants to qualify.
Even within the major banks, some are more self-employed-friendly than others. Westpac offers a “Fast Track” process for eligible applicants, potentially requiring only two personal tax assessments without business financials. ANZ is considered self-employed-friendly, especially for professionals in law, medicine, or accounting, and may accept one year of tax returns or waive LMI in certain cases. St.George typically requires two years of ABN registration but may offer some flexibility depending on your trading history and documentation.
Bottom line? You don’t need a PAYG income to get a home loan – just the right paperwork and a lender who understands your situation.
Why Is It Harder to Get Approved When Self-Employed?
Being self-employed doesn’t mean you earn less – but it can make it harder to prove you’re a safe bet for a home loan. Lenders tend to prefer applicants with regular, predictable income, like a fixed salary and payslips. When you run your own business, your income might look a little different on paper, even if it’s healthy in real life. This is where the credit assessment comes into play, as lenders conduct a thorough evaluation of your creditworthiness, eligibility criteria, and lending limits.
Here’s why the approval process can be more challenging:
Your Income Goes Up and Down
According to stats from the Australian Bureau of Statistics, self-employed income fluctuates more from month to month – or season to season – than it does for employees. One month might be booming, while the next is quieter. Even if your annual income is strong, lenders are cautious about anything that feels inconsistent. This is why they require income evidence to ensure that there is a reliable and consistent income stream.
Your Taxable Income Doesn’t Tell the Full Story
Many business owners reinvest profits, claim deductions, or use tax minimisation strategies. While smart for business, it can make your income look lower on paper – reducing how much lenders think you can afford to borrow. Including tax-deductible expenses like company car deductions can demonstrate legitimate business-related costs, which may help in showcasing business financial stability when applying for a home loan.
Banks Require More Documentation
Unlike salaried workers, you can’t just hand over your last two payslips. Most lenders will want to see two years of tax returns, business financials, or other financial documents such as ATO notices of assessment. And when assessing your income, they may take a more conservative approach – especially if your earnings fluctuate or your taxable income looks low on paper.
Document Requirements for Self-Employed Home Loans
When it comes to applying for a self-employed home loan, documentation is king. Lenders need to see a clear picture of your financial health, which means you’ll need to provide a variety of documents. Typically, self-employed borrowers are required to submit:
- Financial Statements: This includes balance sheets and profit and loss statements that give a snapshot of your business’s financial performance.
- Tax Returns: Both personal income tax returns and business tax returns are crucial. These documents help lenders verify your income over the past few years.
- Business Activity Statements (BAS): These statements provide a quarterly summary of your business’s income and expenses.
- Identification Documents: Standard ID documents like a driver’s license and passport are necessary to verify your identity.
- Business Registration Documents: An active ABN and any relevant business licenses show that your business is legitimate and operational.
In some cases, lenders might ask for additional documentation, such as a letter from your accountant or a copy of your business plan. It’s always a good idea to check with your lender for their specific requirements to ensure you have everything in order before you apply.
Types of Self-Employed Home Loans
When you’re self-employed, lenders don’t offer a completely different set of loan products – you’re still applying for a standard home loan, like a fixed or variable rate loan. What changes is how your income is assessed and the documentation required, which may include details related to a business loan to demonstrate financial stability.
Lenders generally group self-employed applications into three categories: full doc, low doc, and alt doc. These terms refer to the type of documentation you provide – and they matter, because they affect the interest rate you’ll pay, how much you can borrow, and the size of the deposit you’ll need.
| Documentation Required | Typical Interest Rate | Minimum Deposit | Best For | |
|---|---|---|---|---|
| Full Doc | 2 years of personal and business tax returns, financial statements | Standard market rates (lowest available) | 10–20% | Established businesses with consistent income and up-to-date financials |
| Low Doc | BAS, accountant declaration | 0.5-1.5% above standard | 20-30% | Newer businesses, fluctuating income, or delayed tax returns |
| Alt Doc | At least 1 year of tax returns, plus BAS, bank statements, or accountant’s letter | 0.3-0.8% above standard | 15-20% | Businesses with decent trading history but limited paperwork |
Full Doc Loans
Definition: Full documentation loans are standard mortgage products that require complete financial records to verify your income. They typically offer the most competitive interest rates and flexible features.
To qualify for a full doc loan, you’ll usually need:
- Two years of personal and business tax returns
- Notices of assessment from the ATO
- Business financial statements
- Recent bank statements.
Full doc loans are ideal for established business owners with consistent income and up-to-date records. Because you’re providing the full financial picture, lenders are more confident in your borrowing capacity – meaning you’ll often access lower rates, lower fees, and more loan options.
Low Doc Loans
Definition: Low documentation loans are designed for self-employed customers who don’t have all the paperwork required for a full doc loan – often because their business is newly established or their financials are still being finalised.
Instead of traditional proof of income, these loans allow alternative methods like:
- Business Activity Statements (BAS)
- An accountant’s declaration
- Business bank statements.
While low doc loans offer greater flexibility, they usually come with higher interest rates (typically 0.5% to 1.5% above standard) and may require a larger deposit – often 20–30%. These loans are best for borrowers with a strong income and solid deposit, but incomplete tax documentation.
“Low doc loans are a perfect solution for borrowers whose currently quarterly income figures do not accurately depict their overall situation, this is where an accountant that understands your situation can assist with a signed declaration to help get your loan over the line”
Mansour Soltani, Soren Financial
Alt Doc Loans
Definition: Alternative documentation loans sit between full doc and low doc options. They’re designed for borrowers who don’t quite meet the full doc criteria but still have some solid financial records to support their application.
Alt doc loans typically require:
- One year of business tax returns
- BAS or recent business bank statements
- An accountant’s income declaration
For self-employed individuals, including those in business partnerships, different documentation may be necessary to demonstrate the financial position to lenders.
These loans usually offer better rates and lower deposit requirements than low doc loans, making them a popular option for self-employed Aussies with growing businesses or recently improved income.
Eligibility Criteria & Key Requirements
Before you apply, it’s worth knowing what lenders are actually looking for. Here are the key eligibility criteria self-employed borrowers need to meet to improve their chances of getting approved, including understanding the types of loans available such as a secured loan.
ABN Registration Length
Most lenders require self-employed applicants to have held an active Australian Business Number (ABN) for at least 12 to 24 months. This helps show that your business is stable and has a reliable trading history. While most banks prefer a full two years of ABN registration, some specialist lenders may accept a shorter time frame – particularly if you have strong industry experience or a solid financial track record.
GST Registration
If your annual business turnover exceeds $75,000, GST registration is compulsory. But besides being a tax requirement, lenders also view it as a sign your business is legitimate, established, and actively trading – which can support your home loan application. Additionally, specific conditions apply to different types of borrowers, including non Australian resident borrowers, who must review the terms and conditions carefully, particularly regarding interest rates and associated fees.
Income Verification Period
Lenders usually assess your income over the past 1–2 years. They’re looking for:
- At least 12 months of consistent income
- No significant drops in earnings
- Evidence that you can comfortably meet repayments – even if interest rates rise, especially during the initial interest-only periods.
If your tax returns aren’t up to date, some lenders may accept alternative paperwork like BAS, business bank statements, or an accountant’s declaration.
Credit Score Requirements
Your credit score plays a big role in how lenders assess your application. Most look for a score of 650 or above, with better interest rates available for borrowers above 700. Because self-employed income is seen as less predictable, some lenders apply tougher credit requirements compared to PAYG borrowers – so it pays to keep your credit in good shape. Additionally, understanding comparison rates is crucial as they provide a clearer picture of the true cost of a loan, helping you make informed financial decisions.
Deposit Expectations
While it’s possible to buy with a 10% deposit, most lenders prefer self-employed borrowers to have at least 20% saved. A larger deposit helps reduce risk for the lender and can help you avoid paying Lenders Mortgage Insurance (LMI). If you’re applying for a low doc loan, you may need a deposit of 30% or more. Additionally, making additional repayments can provide flexibility in managing your loan, potentially reducing interest costs and allowing for early repayment without altering the overall loan structure.
What Lenders Look For (And How They Assess Your Application)
When you apply for a home loan as a self-employed borrower, lenders dig a little deeper. Here’s what they’re really looking at – and how they assess whether you’re a safe bet.
Understanding the costs associated with your loan is crucial. The comparison rate calculated is based on a standard loan amount and term, incorporating applicable interest rate discounts. This rate may vary with different loan terms and fees, so it’s important to consider it when evaluating your options.
Income Consistency and Sustainability
Lenders want to know your business income is reliable – and likely to continue. They’ll usually look at your taxable income over the past two years, and may calculate your average earnings like this:
- Average the last two years of income
- Add back non-cash deductions (like depreciation)
- Use the lower figure if your most recent income has dropped.
Big swings in income between years can raise red flags. If your income declined last year, some lenders may base your borrowing power on that lower figure alone. Self-employed borrowers can access various types of loans, including fixed rate loans, which offer stability in terms of interest rates and fees.
Business Viability and History
It’s not just about income – lenders also assess how sustainable your business is. They’ll consider:
- How long you’ve been operating
- Whether revenue is trending up or down
- The stability of your industry
- Whether you rely on one or two clients, or have a broader customer base
- The valuation of the security property, which may differ from the purchase price and is crucial for determining interest rates and applicable fees on secured loans.
A business with multiple revenue streams usually presents lower risk than one dependent on a single contract or customer.
Debt-to-Income Ratio
Definition: Your debt-to-income ratio compares how much debt you have to how much you earn. It’s calculated by dividing your total debts by your gross annual income.
Lenders generally like to see a DTI below 6, and ideally under 4.5 – especially for self-employed borrowers. If your DTI is too high, it may limit how much you can borrow or trigger stricter approval conditions. Understanding loan costs, including how different loan amounts can affect your DTI, is crucial for better financial planning.
Loan-to-Value Ratio (LVR)
Definition: Your LVR is the percentage of the property value you’re borrowing. It’s calculated by dividing the loan amount by the property’s value, then multiplying by 100.
If you’re self-employed, lenders are more likely to offer better interest rates and fewer conditions if your LVR is 80% or less (which means you’ve got a 20% deposit). The lower your LVR, the stronger your position – some lenders may reduce your rate slightly for every 5% you go below the 80% mark.
Industry Risks and Trends
Not all industries are treated equally. Lenders consider the risk level of your industry based on economic conditions, seasonality, and stability.
Industries that are viewed more favourably are things like:
- Healthcare
- Professional services
- IT and tech
- Essential retail
Industries that often face tighter scrutiny include:
- Hospitality and tourism
- Entertainment
- Construction
- Retail fashion
If you work in a higher-risk industry, you may need to provide extra documents or demonstrate more consistent income.
Understanding loan terms, such as the fixed rate period, is crucial. The fixed rate period is the specific duration during which a fixed interest rate applies to your home loan. After this period ends, the loan’s interest rate will convert to a variable rate. Be aware that conditions, such as early repayment costs, may apply if you switch loan types before the end of this fixed rate period.
Fees and Charges Associated with Self-Employed Home Loans
Self-employed home loans often come with a unique set of fees and charges that you need to be aware of. These can include:
- Higher Interest Rates: Due to the perceived higher risk, self-employed borrowers might face higher interest rates compared to traditional employed home loans.
- Ongoing Fees: Monthly administration fees can add up over time, so it’s important to factor these into your budget.
- Establishment Fees: These can include loan settlement fees and document preparation fees, which are one-time costs incurred at the start of your loan.
- Early Repayment Fees: If you decide to pay off your loan early, you might be hit with early repayment fees. It’s crucial to understand these terms before committing.
- Lenders Mortgage Insurance (LMI): If your deposit is less than 20%, you may need to pay LMI, which protects the lender in case you default on the loan.
Carefully reviewing these fees and charges will help you get a clearer picture of the total cost of your loan and assist in planning your loan repayments effectively.
Self-Employed Home Loan Interest Rates
Interest rates for self-employed home loans can vary widely depending on several factors, including the lender, the type of loan, and your financial situation. Because self-employed borrowers are often seen as higher risk, you might encounter higher interest rates compared to traditional employed home loans. However, this isn’t always the case.
Some lenders offer competitive interest rates for self-employed borrowers, especially if you have a strong financial history and a substantial deposit. It’s essential to shop around and compare interest rates from different lenders to find the best deal. Remember, even a small difference in interest rates can significantly impact your loan repayments over time.
Should You Use a Mortgage Broker for a Self-Employed Home Loan?
If you’re self-employed, working with a mortgage broker instead of a bank can make a big difference – especially when your income isn’t as straightforward as a standard 9-to-5 job.
A good broker knows which lenders are flexible with self-employed income, which ones accept low doc or alt doc applications, and how to package your paperwork so you don’t get knocked back over something minor.
They also do the legwork for you – comparing rates, chasing up documents, and talking to lenders – so you can focus on running your business.
Here’s why it’s worth considering a broker:
- They know which lenders work best with self-employed borrowers
- They can help you find a more competitive rate – even if your income varies
- They’ll tell you upfront what documents you need and help you get them in order
- They often have access to specialist lenders the public can’t deal with directly.
If your income is complex, your business is new, or your tax returns don’t tell the full story, a broker can give you a better shot at approval – and save you time and stress along the way. Plus, self-employed individuals can apply for residential home loans under the same conditions as PAYG customers, including receiving the same interest rate, offers, and features.
Tips to Boost Your Chances of Approval
Getting approved as a self-employed borrower isn’t just about the numbers – it’s also about how you present them. Here are some practical tips to help improve your chances of success. Understanding the terms and conditions of residential lending, including interest rates and the transition from fixed to variable rates, is crucial. This is especially important as residential lending often has specific restrictions and criteria, such as being inaccessible to Non-Australian resident borrowers.
Separate Business and Personal Finances
Use separate bank accounts and credit cards for your business and personal expenses. As a business owner, this makes your income easier to verify and shows lenders you’ve got your finances under control. Keeping clean records is one of the simplest ways to avoid delays or confusion during the application process.
Hire a Mortgage Broker Who Understands Self-Employed Loans
Working with a mortgage broker experienced in self-employed lending can significantly improve your chances of approval. They can match you with lenders who understand non-traditional income, help with paperwork, and guide you through low doc or alt doc options if needed. This is particularly beneficial for self-employed customers who may struggle to provide the extensive documentation typically required for traditional loans. Plus, brokers often have access to specialist lenders that aren’t available to the general public.
Keep Tax Returns Up to Date
Make sure your most recent personal and business tax returns, along with other necessary financial documents, are lodged before you apply. If your returns are overdue, most lenders won’t even look at your application. Having everything up to date also helps avoid nasty surprises and can speed up the approval process.
Expert Insight: The Mortgage and Finance Association of Australia (MFAA) reports that outdated tax returns are the #1 reason for self-employed loan rejections.
Reduce Business Debt and Liabilities
Lenders look at your total financial commitments – including business credit cards, equipment loans, and personal debt. Reducing what you owe, especially if you have a secured loan, can improve your borrowing capacity and make you a more attractive applicant. If you’re able to clear any unnecessary liabilities, do it before applying.
Improve Your Credit Score
Your credit score matters – especially when you’re self-employed. Aim to:
- Pay all bills and debts on time
- Lower your credit card limits if they’re unused
- Check your credit report for errors at Equifax
- Avoid applying for new credit in the months leading up to your home loan application
Understanding the specific credit criteria that lenders use can also help you improve your eligibility. Review the terms and conditions to ensure you meet these criteria before applying.
Save for a Larger Deposit
Saving more money towards a deposit doesn’t just reduce your loan amount – it also shows financial discipline and reduces the lender’s risk. If you can save 20% or more, you may avoid Lenders Mortgage Insurance (LMI) and unlock better interest rates. Some lenders may offer more flexibility with documentation if your deposit is strong. Additionally, having a larger deposit can provide more options for making additional repayments, which can help you pay off your loan faster and reduce the overall interest paid.
Common Mistakes to Avoid
Even strong applicants can run into trouble if they’re not prepared. A thorough credit assessment is crucial, as it evaluates creditworthiness, eligibility criteria, and lending limits. Here are some common mistakes self-employed borrowers make – and how to avoid them.
Underestimating Documentation Requirements
Problem: Many self-employed applicants are caught off guard by how much paperwork is needed.
Solution: Start early. Give yourself time to get everything in order – especially if you need updated tax returns, financial statements, or declarations from your accountant. Aim to have your documents ready at least 3–6 months before applying. For those who cannot provide traditional income proof, consider alternative methods to establish income evidence, such as low documentation loans that cater to self-employed borrowers.
Applying Too Early
Problem: If you apply before you’ve built a solid business history (typically at least 1–2 years), your application could be knocked back – and that can affect your credit score.
Solution: Speak to a broker before applying. They can help you assess your readiness, and if your business is still new, they may suggest options like applying with a partner, considering business partnerships, or using a guarantor to strengthen your application.
Overlooking Credit Score or Debt-to-Income Issues
Problem: High debts or a low credit score can seriously limit your borrowing power.
Solution: Tidy up your finances first. Pay down existing debts, check your credit report for errors, and avoid taking on new credit in the months leading up to your application. A healthier financial position could mean better loan terms and more lender options. Additionally, understanding comparison rates is crucial as they provide a clearer picture of the true cost of a loan, including fees and charges, helping you make more informed financial decisions.
Not Using a Specialist Lender or Broker
Problem: Big banks don’t always “get” self-employed income – and that can lead to unfair knockbacks.
Solution: Work with a broker who specialises in self-employed lending. They’ll know which lenders take a flexible approach, what documents you really need, and how to package your application for the best chance of approval. Understanding the nuances of residential lending, including interest rates, terms and conditions, and the transition from fixed to variable rates, is crucial. A specialist can help navigate these complexities, especially for Non-Australian resident borrowers who may face additional restrictions.
Self-Employed Home Loan Terms and Conditions
Understanding the terms and conditions of your self-employed home loan is crucial. These terms outline the specifics of your loan agreement, including:
- Loan Amount and Term: The total amount you’re borrowing and the length of time you have to repay it.
- Interest Rate and Repayment Schedule: The interest rate applied to your loan and how often you’ll need to make repayments.
- Fees and Charges: All the associated costs, including establishment fees, ongoing fees, and any potential early repayment fees.
- Early Repayment and Refinancing Conditions: The terms under which you can repay your loan early or refinance to a different loan.
- Loan Settlement and Document Preparation Requirements: The steps and documentation needed to finalize your loan.
It’s also important to consider the comparison rate, which includes both the interest rate and most fees, giving you a more accurate picture of the loan’s total cost. Consulting with a home loan specialist or financial advisor can help you navigate these terms and ensure you’re making an informed decision.
By understanding these key aspects, you can better prepare for the application process and increase your chances of securing a self-employed home loan that meets your needs.
Final Thoughts
Getting a home loan when you’re self-employed isn’t impossible – it just takes a bit more prep. With the right documentation, a solid financial foundation, and the help of a broker who understands loans for self employed, you can get approved without any issues.
Every lender views self-employed income a little differently, so knowing where to apply (and what to show them) makes all the difference. Whether you’re a sole trader, company director, or contractor with fluctuating income, there’s a path forward.
Need more help finding the right mortgage broker? Check out our guides to the best brokers in Sydney, Melbourne, and Brisbane.
FAQs About Self-Employed Home Loans
Can I get a home loan without two years of tax returns?
Yes – if you go with a low doc or alt doc loan. These allow alternative documents like BAS statements, business bank statements, or an accountant’s declaration. Just keep in mind they often come with higher interest rates and may require a larger deposit (20–30%).
Do I need to pay Lenders Mortgage Insurance (LMI)?
Usually, if your deposit is under 20%. Some lenders may even require LMI on low doc loans with deposits up to 25–30%. Costs vary but generally range from 1–3% of the loan amount.
How do lenders calculate my income?
They usually average your last two years of income, but may use the lower year if there’s a drop. For companies or trusts, they’ll include your salary, dividends, or distributions. Clear, consistent records help your case.
Can I use my business income and personal income together on the same application?
Yes – if you earn money from both sources, lenders will usually look at your total income. Just be prepared to verify both with separate documentation (e.g. payslips for PAYG work and tax returns for your business). A broker can help present this clearly so it works in your favour.
Can I refinance later to a better rate?
Yes, and many self-employed borrowers do. Once you have two full years of tax returns or improved financials, you may be able to refinance to a full doc loan with lower rates and better features.
What if I’ve only recently gone self-employed?
You might still qualify for a home loan, especially if you’ve worked in the same industry. Some lenders will consider your previous experience, especially for professionals or trades. Otherwise, consider applying with a PAYG partner, using a guarantor, or starting with a smaller loan.
Can I get a home loan if my business had a slow year?
It depends. If your most recent income is lower than the year before, lenders may use the lower figure to assess how much you can borrow. But if there’s a strong explanation – like temporary shutdowns or reinvestment – some lenders may be flexible. A detailed letter from your accountant can help tell the full story.
MANSOUR SOLTANI
With over two decades of experience in Australia’s real estate sector, Mansour has built a career specialising in the acquisition and sale of investment and commercial properties, spanning major metropolitan hubs and regional areas. As the founder and owner of a finance brokerage firm, he manages a loan portfolio exceeding $100 million while serving a broad range of clients nationwide.
A frequent contributor to money.com.au, Mansour has developed a deep understanding of diverse investment strategies, enabling him to provide valuable, well-informed perspectives on market trends and opportunities.
