How To Refinance When Self-Employed?
It is often harder to refinance when you are self-employed because there are tougher requirements from lenders in regards to proving your income compared to an employee. Lenders typically require a significant amount of supporting documentation and proof of income for self-employed borrowers. The lack in consistency of income can also make it harder to increase your borrowing power to enable you to refinance.
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However with the right documentation and strategy there are several ways for self-employed individuals to improve their chances of refinancing their home loan to a more suitable product to kickstart their debt reduction journey.
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How Do I Show Proof Of Income When Self-Employed?
One of the biggest challenges faced by self-employed borrowers is providing proof of income. Unlike traditional employees who receive regular pay slips, self-employed individuals may have income streams that go up or down. In some cases, their current income might not truly reflect how much money they earn. This can make it difficult to prove their ability to repay or meet the requirements of a home loan.
One simple solution is to keep detailed financial records. By tracking income and expenses, self-employed individuals can provide lenders with a clear picture of their financial position. This can include tax returns, bank statements and profit and loss statements. A great way to do this is with the help of a determined accountant - Please click here to speak to us about your requirements. This will give a lender an easy snapshot of how your business is doing financially.
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Do I Need To Show A Track Record Of My Business?
Another challenge faced by self-employed borrowers is the perception of risk from the lender's perspective. Without steady income, lenders may view self-employed individuals as a higher risk of default. However, this does not necessarily mean that refinancing your home loan is not possible.
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Many lenders will lend to self-employed borrowers when provided with the appropriate documentation. For example, two years' worth of tax returns. This shows the lender that the business is profitable over a longer period of time which reduces their risk.
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Can I Apply For A Low Doc Loan?
If you don't have 2 years worth of tax returns you may benefit from applying for a low doc home loan. We specialise in refinancing self-employed home loans using low doc home loan products to assist business owners in achieving their goals of home ownership.
There are certain lenders that are more accustomed to working with business owners and are able to better assess the needs of this type of borrower. These lenders might be able to refinance your home loan based on BAS statements, bank statements or an accountant’s declaration. These lenders may be more suited to your needs as they are very familiar with the challenges faced by self-employed individuals and have more flexible lending requirements.
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How Important Is My Credit Score When Self-Employed?
It's also vital for self-employed borrowers to be aware of their credit score - both individual and company. A good credit score can go a long way to securing a great refinancing deal on your home loan. By paying bills a few days before they are due, reducing credit card balances and checking their credit report for errors, self-employed borrowers can improve their credit scores over time and increase their chances of refinancing to a more suitable home loan product to help you achieve your goals.
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In conclusion, refinancing your home loan when you're self-employed requires careful planning and preparation. We specialise in helping self-employed homeowners refinance to a home loan product that is going to help them pay off their home loan in the next 10 years using our tax and lending strategies!
Contact us today to find out how we can help you!
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