Compare Home Loans for Small Business Owners

Compare home loans for small business owners

Buying your first home is a big step, especially when you’re also trying to run your own company as a small business owner. Savvy looks at the different home loan options available to small business operators and the paperwork you may need to supply when applying for a home loan. We can help you compare and save for all your finance needs.

How do I get a home loan as a small business owner?

As a small business owner, you’re self-employed. Previously, the big banks were reluctant to lend money to self-employed people, but that situation changed when online lenders stepped up to fill in that gap in the Australian home loan lending market.

As long as your company has been running for at least two years and is showing a good profit, there’s no reason why you can’t apply for a home loan in the same way as any other PAYG employee and be confident of being offered a very reasonable low interest rate.

You have several options available to you if you don’t quite meet the standard home loan eligibility criteria, though. These include:

applying for a low doc home loan with an online lender, particularly one which specialises in approving loans for non-conforming borrowers (if your company has not been running for a sufficient time or you don’t have the full documentation required)
providing a higher than usual deposit – the usual deposit required by a lender is 20% of the price of the property you wish to purchase. If you can offer more than this, such as a 30% deposit, your chances of loan approval may improve dramatically
asking a close family member with equity in their own home to act as a guarantor for you – this would mean that your family member would agree to be responsible for the loan if you become unable to pay it and can allow you to sidestep the requirement for a deposit to be made at all in some cases
applying for a home loan in the name of your company – this may be an option for you, but it will mean that all directors of your company would have to agree to be guarantors to your loan and you would lose out on CGT benefits if you were to sell your property

What paperwork will I need for my home loan application?

The paperwork that you’ll need to provide to your lender will have to prove your identity, your assets and liabilities and how much it costs you to live. You will also have to provide information about your company, and how it is performing.

Personal documents you’ll need include:

Personal Identification:

You’ll need to provide 100 points of ID, including at least one document that includes your photograph and a signature. These may include:

your passport (which must be current or expired no more than 2 years)
your birth certificate
your Australian citizenship certificate
your driver’s licence (which is currently valid)

Details of your income:

how much you receive personally from your company
any income you receive from any other sources
any government benefits you are entitled to, such as family tax benefits
any dividends, interest or rental income from any investments
a copy of your tax returns and Notice of Assessment for the past two years showing your declared income

A list of your assets:

This should include the registration certificates or other proof of ownership of all:

cars
caravans
boats and trailers
other recreational vehicles you may own

Also, include in your assets list:

shares you own
other valuable items over $5,000, such as jewellery or collections
your superannuation balance
any cash deposits or savings you may have

A list of your liabilities:

This should include all monies that you owe to other people or institutions including:

any other loans you have in your own, or your company name
all credit cards with details of their credit limit
all other store credit or lines of credit you have in your or your company name
all child maintenance payments you may be liable for
any other court-ordered debt, fines or promises to pay that you’ve made

A list of your living expenses

This should show details of how much it costs you to live, so it should include figures for items such as:

your current rent or mortgage
utility bills such as gas and electricity
your phone, internet and telecommunication contracts
all the cost of subscriptions and memberships to gyms, sporting clubs or organisations that you belong to
an estimate of the cost of buying food and clothes for your household members
how much you spend on leisure items such as movies, going out, take-away meals, coffees and more

You can use Savvy’s budget planner calculator to combine all your household expenditure items into one single document to make your loan application easier and give you a better idea of what sort of loan repayment you can afford.

Business documents required

In addition to the above personal documents, if you’re looking for the best home loan for a small business owner, you’ll also need to supply the following business documents:

your company ABN, ACN and TFN
your company tax returns for the past two financial years
your company Notice of Assessment for the past two years
your company Business Activity Statements (BAS) for the past 8 quarters
a profit and loss statement for your company for the past two years

What type of home loan is the best loan for self-employed Australians?

As a small business owner, your personal income may grow as your company grows – so you should think about a loan that is as flexible as possible. This may mean a variable home loan that offers you plenty of additional features may be your best option. Additional features that can come with a variable rate home loan include:

an offset account – so you can place your savings in this offset account and have the interest cost of your loan reduced (offset on a dollar-for-dollar basis)
the ability to make additional repayments – so you can make more repayments over and above your mandated repayments, reducing your payable interest and overall term
repayment flexibility – so you can choose how often you make your loan repayments, and pay your loan off sooner if you choose to
a redraw facility – so you can redraw your additional repayments if you suddenly need additional cash for company growth or investment

However, on the other hand, a fixed rate home loan will offer you the certainty of knowing exactly how much your loan repayments will be for the entire period of the fixed rate. This known quantity could be valuable to you as a small business owner if you are juggling all the costs of growing your business.

Home Loans For Small Business Owners