Self-Employed Income Verification Using BAS
Business Activity Statement (BAS) only income verification now available!
What’s the deal?
With quarterly Business Activity Statement (BAS) reporting due April 28, it’s a good time to consider getting some extra bang for your buck. As I’m sure you are aware, every self-employed business owner is required to submit their BAS by law, so why not put this effort to work in more than one place?
If you’re looking to make a home purchase or refinance an existing loan, BAS only income verification is now available for Prime Alt Doc loan applications. What does this mean exactly?
Lenders will assess your income using details taken from just you BAS, and
Additionally, you will be eligible for a very good interest rate that is usually only marginally behind that available to Prime Loan Applications.
This is great news for many self-employed who, in some circumstances, would not be able to qualify for a loan without this income verification approach. And moreover, means many business owners now don’t have to accept higher interest rates when compared to their PAYG peers.
Case Study
Below is an example of how this approach made a difference for a recent loan application.
Scenario
Sam is a local commercial Electrician here on the Sunshine Coast with 5 employees. He runs his company through a Pty Ltd ATF his Family Trust. The company is trading profitably, is expected to continue trading profitably going forward, can manage its own financial commitments, and has all taxation/statutory obligations up to date.
Application Details
Applicant Details:
ABN active for 6 years and GST registration for 4 years.
Looking to refinance an existing home loan and consolidate their debt.
Loan to Value Ratio (LVR) of 80%.
2 x BAS available for two preceding quarters.
Issues
The loan application faced several issues including:
Applicant’s 2022 Tax Returns were not yet ready.
2021 financials showed negative covid impacts to income.
Their accountant was not willing to sign any bank letters, and their business bank statements were over 50 pages long making two forms of Income Verification near impossible.
Without two forms of income verification, the application would normally be assessed as a Near Prime loan and therefore subject to higher interest rates and additional risks fees.
Solution
The applicant’s BAS and BAS Calculation Worksheet were provided for income verification per the BAS only policy requirements. This allowed their loan application to be successfully assessed and approved under the Prime Alt Doc criteria.
Not only were they able to obtain lending to refinance and consolidate debts, but they did so with the additional benefits associated with Prime Alt Doc loans:
No risk fees/LMI at any LVR in Prime Alt saving them $6k.
Received a lower interest rate on their loan.
Paid lower upfront fees.
All this using documentation already put together – bang for buck!
Things To Keep In Mind
Notable conditions to be aware of if you are considering this BAS only approach:
The maximum LVR is 85% for both Owner Occupied and Investment loans in Metro locations.
For debt consolidation there are certain restrictions on some types of debts, like ATO debt for instance.
As always, if you have any questions or want to discuss a scenario, give me a call!
