Being self-employed allows for great amounts of flexibility and the capacity to unlock large sums of growth financially, but does present its own challenges in the process. The main struggles are seen when wanting to borrow money. Obtaining a mortgage can be seen as a challenge for self-employed Australians for a variety of reasons. One of the more prominent challenges was the limited or fluctuating income documentation that self-employed individuals typically maintain. Difficulties can be seen in proving evidence of a stable income and the ability to complete the loan repayments. The lack of traditional employment benefits, such as paid leave or superannuation are missing for self-employed individuals, which adds to the perceived risk for lenders. Also strict lending criteria, higher deposit requirements, with the generally perceived view of the higher risk that’s associated with self-employment contributes to the many problems that can be faced by self-employed Australians when wishing to secure a mortgage. This is why an experienced mortgage brokering team like WizWealth Finance can be so beneficial by making the process easier. The WizWealth team will help find the most cost effective products that will be suitable for self-employed individuals and also prepare your applications following all the requirements that are defined by the lender policies.
Why it is different if you are self-employed?
Lenders assess the self-employed individuals differently from PAYG (Pay As You Go) applicants due to the issues of income stability and documentation that can be faced by self-employed workers. Self-employed individuals can often go through periods of unstable income, which makes it harder for lenders to be able to predict the future earnings to see there capability in being able to meet mortgage repayments in a consistent manner. This is seen in contrast to PAYG applicants who have stable incomes due to the pay period which sees them getting paid in a consistent manner. To allow for the ability to make up for the uncertainty with self-employment income, lenders will ask for additional documentation, which are seen to be tax returns and business financial statements, in order to better understand the financial viability and stability of self-employed borrowers. This process is seen to be quite different in comparison to the PAYG applicants but is done to help lower the perceived higher risk that is associated with self-employment and allow for responsible lending practices, by working with WizWealth the chances of getting approval see a significant increase.
Exploring Variable Rates
Self-employed mortgage rates have the option of variable rates and fixed rates. A variable-rate home loan offers the borrower a more flexible approach to managing finances as they aim to buy a new home. This entails that as the situations change you will be able to re-manage your payments with the lender if it is required. Some lenders also offer additional options such as making extra payments when you have additional funds at no charge and even the option of redrawing to gain further amount of funds if they are required. With the help of WizWealth Finance you will be given the opportunity to choose variable interest rates that start at 5.69%. There are different rates which are based on the loan to value ratio for the amount required.
*Rates starting from 5.88% as of 17/7/2023** Subject to Lenders assessment criteria
Choosing Fixed Rates
Fixed home loan options when trying to explore self-employed mortgage rates are your other choice. This will be more stable as you will know the repayment amounts for the loan throughout the whole of the loan tenure, as it will stay at the one fixed rate. For something around a 3 year plan the fixed rate starts at 5.69%. Fixed rate means that there is likely to be an early repayment fees or break costs in case of the decision to pay the loan fully during the fixed rate term. If you want flexibility for an early repayment that can be achieved through splitting the loan so some of it is variable.
*Rates starting from 5.69% as of 18/07/2024** Subject to Lenders assessment criteria.
Talk to us to learn more!
If you are wanting to understand more about the mortgage options for the self-employed, give us a call or utilize our website to get in touch at WizWealth Finance. We put a focus on establishing long term partnerships with our clients to ensure their financial strengths. We maintain a professional but flexible approach to help as many people as we can achieve their dream of purchasing a new home. We hope we can help you too!
