90% LVR for Self Employed?

Discussion in 'Loans & Mortgage Brokers' started by edp_2019, 16th Nov, 2019.

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  1. edp_2019

    edp_2019 Member

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    Coolum Beach
    Hi everyone,

    I run a company that has been ABN registered since September 2017 (2 years 2 months) and have been profitable each year.

    I have full tax returns and BAS statements, no debt, up to date with all tax obligations with the ATO in terms of company taxes, PAYG, Super obligations etc. I pay these on time every quarter and have an accountant / bookkeeper on board to make sure everything is in good shape.

    Currently the only employees of the company are myself and my wife. I take $95K gross and she takes $30K gross per year.

    We have $80K in cash savings, no credit cards, loans or debt. One 3 year old child.

    We are currently renting in Coolum Beach on the Sunshine Coast and love the area and want to buy a PPOR.

    We can get a nice home around here for $650K so that is the number we are playing with.

    Given my circumstances above as company director / self-employed, is it possible to get a 90% LVR loan?

    i.e.

    $650K purchase price
    10% deposit = $65K
    Stamp duty = $13K
    Other costs = $5K
    Total = $83K

    Need to borrow approx $585K ($650K minus 10% deposit)

    Is this possible? Or do we need the 20% that I keep hearing about for self-employed?

    Thanks for your help!
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    Where did you hear that? Self employed people can get 90%LVR loans yes, did one for a client last week.
     
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  3. edp_2019

    edp_2019 Member

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    Google I suppose. Almost every article / site I come across states the 20% or at worst 15% deposit due to higher risk.

    What do lenders typically want to see for a 90% loan like this?

    Our personal bank statements (how many months)?
    BAS Statements (how many quarters)?
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

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    They'll want to see two years financials for the biz, two years tax returns for the business and personal returns as a start.
    They may not want to see current BAS
    Depending on lender could be one month personal transaction account statements or 3 months, business accounts 3 to 6 months
     
  5. edp_2019

    edp_2019 Member

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    Thanks for your help.

    When you say 2 years financials for the biz, do you mean profit & loss from Xero or something?

    In terms of our borrowing capacity, what do they base that on? Our personal returns? Because we paid ourself much less in year 1 and 2 compared to what we pay ourselves now so our tax returns would reflect low gross wages back then.

    Again, thank you!
     
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  6. Lindsay_W

    Lindsay_W Well-Known Member

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    Yeah 2 years Profit and Loss
    What you paid to yourself via wages isn't the deciding factor, most lenders will look at the business income combined with add-backs (depreciation etc) in addition to the wages you paid yourselves.
    Each lender is slightly different in how they assess the income, definitely worth speaking to a broker if you haven't done so already
     
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  7. edp_2019

    edp_2019 Member

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    Thank you. I haven't spoken to a broker yet but will get onto it :)
     
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  8. Lindsay_W

    Lindsay_W Well-Known Member

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    No problems :)
     
  9. Morgs

    Morgs Well-Known Member Business Member

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    @Lindsay_W is all over it above.

    Some lenders are better than others in this space where they'll allow you to take only your latest year financials into consideration with the right context (e.g. new/growing business, new contracts, etc). Most lenders want to average the income over two years which for many does not open up the required borrowing capacity.

    Here is an example of what a random lender wants for self employed indicative of what most ask for:

    • Last two years personal taxation returns
    • Last two years personal ATO Notice of Assessment
    • Last two years Business taxation returns (if a sole trader, this information will be contained within the personal taxation returns)
    • Last two years Business Profit & Loss Statements
    • Last two years Business Balance Sheets (a sole trader will not have a balance sheet; a partnership may not have a balance sheet)
     
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  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    98 % even :)

    ta
    rolf
     
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  11. Archaon

    Archaon Well-Known Member

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    you haven't accounted for LMI on a 90% lend, which could be up around 10k.
     

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