Can I Get a Home Loan with ABN Income in Australia?

Understanding ABN Income and Home Loans

In Australia, individuals who are self-employed or run their own businesses typically operate under an Australian Business Number (ABN). This status allows them flexibility and independence but can pose challenges when applying for a home loan. Lenders generally perceive ABN income as less stable than salaried income, which means you must meet specific criteria to prove your borrowing capacity.

Key Requirements for ABN Income Home Loans

1. Duration of ABN Registration

Most lenders require that your ABN has been active for at least two years. This period demonstrates business stability and consistent income generation. However, some lenders may consider applications with a shorter ABN history if you have a strong financial background or relevant industry experience.

2. Verifiable Income Documentation

Unlike salaried employees, who typically provide pay slips, self-employed applicants must submit tax returns, business activity statements (BAS), and possibly financial statements from an accountant. Typically, lenders will ask for the last two years of tax returns to confirm income and assess financial health.

3. Loan-to-Value Ratio (LVR)

To mitigate risk, lenders often impose stricter Loan-to-Value Ratio (LVR) requirements for self-employed borrowers. While PAYG borrowers might secure a loan with a 95% LVR, self-employed individuals might be capped at 80%. This means a larger deposit will be necessary.

Practical Tips and Advice

Improving Your Loan Application

• Maintain Accurate Financial Records: Accurate and up-to-date financial records are crucial. Regularly reconcile your accounts, and consider hiring a professional accountant.

• Increase Your Deposit: A larger deposit can improve your odds of loan approval and might even lower your interest rate.

• Consider a Low-Doc Loan: Low-doc loans are designed for self-employed individuals who may lack comprehensive financial documentation. However, be aware that these can come with higher interest rates and fees.

• Demonstrate Consistent Income: Lenders seek consistency in income. Show stable cash flow through regular invoicing and managed expenses.

Engaging a Mortgage Broker

A mortgage broker familiar with self-employed applicants can be invaluable. They understand the specific challenges and can guide you to lenders more likely to approve your application. Brokers often have access to products and terms not available directly to consumers.

Common Mistakes to Avoid

• Inadequate Documentation: Failing to provide complete and accurate documentation can delay or derail your application.

• Overestimating Borrowing Capacity: Be realistic about your borrowing capacity. Overextending yourself can lead to financial strain.

• Ignoring Professional Advice: Attempting to navigate the lending environment without expert advice can lead to missed opportunities and unfavourable loan terms.

How Esteb and Co Can Help

At Esteb and Co, we specialise in helping self-employed Australians secure home loans. Our team understands the unique challenges you face and can offer tailored solutions. We work closely with a network of lenders to find the best possible terms for your situation. Whether you need help with documentation or exploring low-doc options, Esteb and Co is here to guide you through the process.