From employed to self employed

Hi,

2 months ago I left my job and I am now focusing on getting my income as a self employed.
I have a big buffer with me and 4 properties, all with mortgages with 4 different lenders. All these properties are neutrally geared.

I would like to discuss some few things with my mortgage broker. He assisted me in getting finance for the last property I bought 4 months ago.
The advice I am seeking from my broker is how to get finance next time as a self employed.

If I tell him I am not longer employed, will he need to tell my current lender about this situation?
Is my broker obligated to tell any of my lenders about this situation?
I do understand that technically I need to tell my lenders any change in my situation, but I cannot do this right now as I am in a transition stage.

Any thought about this?

 

Your current lenders won't really care as long as you're still meeting the monthly payments.

 

You are supposed to tell your lender when your circumstances change, but as DT said they won't care as long as you make the payments.

From here, most lenders need two years self employed tax returns before lending. There are a couple of exceptions, but usually the first years returns in a new business aren't that crash hot. Low doc is an option with a very few lenders, this week anyway.

 

Not a big deal - if you called up the lender to tell them you changed job/employment they would likely laugh/say thanks and then hang up when you were done.

tobe has outlined the basics of self employed finance - generally they'll want to see two full years of tax returns to assess income. Some will look at 12 months but don't rely on this - generally a new business isn't running too crash hot during the first year in any case.

 

Pa

Pay yourself a token/ample salary from the business for 3 months leading up to when you next need an approval

 

Doesn't quite work like that - lenders will look at the employer and see that you're one and the same. To work out business income any salary paid from the business to the individual is added back to the P&L and from there the net profit figure can be calculated.

 

They'd look thought to check directors/ shareholders of a company for example?

 

Andy what business have you started?

 

Indeed. Every time, every lender.

 

Correct ^^^^^

 

^^^ Yep; our last purchase was for a PPoR site, bought on Dec 29, 2015.

The property cost $660k, we put in $200k cash, but even with that equity position; the hoops we had to jump through to get remaining finance was unbelievable; my wife and I are Directors of our own Company, and my wage is from the Company.

The Lender wanted to see last 2 years Company and Personal tax returns - which we had, but also current Fin Year figures for Company signed off by Accountant.

It was a bit scary; we bought the property on a 30 day settlement and at asking price just to secure the deal asap (in a relatively hot market), and thinking last 2 years Fins would be enough, but when they asked for the current ones; we hadn't much of that Fin Year up to date, and of course; over Dec/Jan holiday break......everyone is on Hols and can't get any action.

We then had to extend the Finance clause twice..very worrying because we thought the Seller might have pulled out.

 

You betcha. They'll also see if the business is a relatively new one, if it's owned by a related party etc and have policies for all of these scenarios.

Directorships in particular are also all noted on your credit file which is always reviewed.

 

self employed is no big deal, there are lenders who will take 1 years tax returns most will need 2. You will need your ABN registered for 2 years however before you fit policy, unless you have a solid previous history in the same field and continue with great income in your first year.

Example;

I do loans for a lot of legal professionals and recently had a loan approved for a barrister who had been self employed for 16 months and ABN registered for the same amount of time. We showed a 10 year history as a lawyer, first years tax returns as se and bas statements to get the deal over the line as an exemption to policy.

Get a good broker who can put it together.

 

Thanks a lot for your feedback.
How all this apply to property development and finance?
3 of the sites I have are development sites (2 to 4 townhouses each). I will be selling the first one in approx 9 months.
I will be having income in managing the developments, but the main income will be as a developer.
Therefore, I will be receiving a big chunk every year. I was told lenders don't like this, as they prefer income in small regularly.

Is there any way to address the "small regular income" as opposed the "big chunks"?