The Path of Least Resistance
If your self-employed, this post will show you the path of least resistance to obtaining your mortgage.
What’s the deal?
As discussed in our earlier blogs, if you are self-employed, the usual way banks assess your income and ability to service a loan can become overly complicated with many, many documents required. Especially if you have a complex setup with multiple active loans for equipment and assets, or complicated business structures where your income is sourced through multiple entities. Making things further complicated, depending on the lender chosen and their loan product offered, the serviceability methods and supporting documentation each will ask for also varies!
If this makes you head spin, take a deep breath – there is hope! There are now loan products available to us at I Know The Broker, whereby your income is assessed using just your two most recent personal Australian Taxation Office (ATO) Notice of Assessment’s (NOA).
That’s it! We like to call it the path of least resistance!
This new method of income verification assessment will be the focus of this post, the third in our series of newsletters highlighting changes in the self-employed lending environment. Check out the example we present below.
The following example will walk us through the difference in two applications methods to highlight the difference in documentation requirements when comparing the usual income assessment method and the path of least resistance we described above.
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.
Sam is looking to refinance his current home and investment loan, with his particulars consisting of:
· Current Home Loan held in personal name.
· Investment Loan held in personal name.
· 5 car leases.
· 1 Green Loan.
· 1 Business Credit Card.
· Numerous asset loans for specialist business equipment.
Outcome on Supporting Document Requirements for Income Verification
As you can see in the table below, the reduction in paperwork is huge!
While this new income verification method doesn’t have a large bearing on borrowing capacity, it does really make life a whole lot easier. The time and effort saved with reduced paperwork is enormous, and the flow on benefits (such as not missing out on an opportunity) can quite often be just as significant in the long term.
Things To Keep In Mind
As in all our case studies, they are for demonstration purposes and assume the applicant qualifies for the loan product we are discussing. As for any loan application, there are always terms and conditions that must also be met to take advantage of the lending policies mentioned.
If you would like to learn more or ask us a question, please don’t hesitate to get in touch. Helping the self-employed successfully navigate the lending landscape is our specialty!