Self Employed Loans - 85% LVR

Discussion in 'Loans & Mortgage Brokers' started by izzy16, 28th Mar, 2018.

Join Australia's most dynamic and respected property investment community
  1. izzy16

    izzy16 Well-Known Member

    Joined:
    12th Oct, 2016
    Posts:
    80
    Location:
    Sydney
    Hi all,

    I'm self employed and hoping to buy a property for $800K as soon as possible.

    I'm wondering if the following product is available for someone like me:
    • 85% LVR loan
    • Self employed since September 2017 (7 months)
    • My business has recurring monthly cash flow of approx $18,000 p/m
    • Currently have $140K savings in the bank
    I realise my ABN hasn't been registered long, so was wondering if I needed to be in business 12 months or so. We are also a bit short on the deposit side of things.

    I think at 80% LVR we would need close to $200K. Whereas 85% makes it around $150-160K which will be a lot easier to attain.

    Thanks!
     
    yorkie likes this.
  2. Air_Bender

    Air_Bender Well-Known Member

    Joined:
    9th Jan, 2016
    Posts:
    691
    Location:
    Melbourne
    I'm not 100% sure but it's my understanding that if you're self-employed you'll need at least 2 years of tax returns before they'll consider loaning to you.

    The experts can chime in and correct me if I'm wrong.
     
  3. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    Joined:
    31st May, 2016
    Posts:
    2,738
    Location:
    Australia
    Hi Izzy

    Lenders generally require 2 years of ABN registration and you being in operation for that time. Some allow reliance on 1 year financials once you have had the ABN for 2 years.
     
    Air_Bender likes this.
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    85% or even 90% loans are no problem for those who are self employed. The difference is in how income is verified. Easy if you're not self employed, they rely on payslips and a few other things that are readily available.

    The problem with being self employed is there's plenty of evidence to suggest that most people who are self employed go out of business within the first 2 years. In the failure of their business they also tend to leave behind additional debt.

    Hence most lenders want to verify that you've been SE'd for at least 2 years before they get comfortable. They can easily verify this via checking the ABN.

    Whilst there are some lenders that will be okay with 1 year of tax returns, loans above 80% are considered more risky and even those lenders will require 2 years of tax returns. By this they're trying to establish longevity and consistency.

    There are exceptions, for example there's some lenders that will lend for certain purposes against an ABN established yesterday. These loans tend to fall outside of responsible lending legislation and have other risk mitigation elements. Essentially you're not going to be buying a property at 85% LVR with this type of loan.


    @izzy16 the information supplied is fairly brief, so the best advice I can give at this point would be to keep working, keep saving, until at least late 2019. Get your tax returns done and make sure they show enough profit to demonstrate serviceability.
     
    Eric Wu, Air_Bender and Jamie Moore like this.
  5. Marty McDonald

    Marty McDonald Mortgage broker Business Member

    Joined:
    22nd Jun, 2015
    Posts:
    874
    Location:
    Sydney North Shore and Norther beaches
    Hi,

    Come July / August 2018 you can get a tax return done which will cover almost 1 full years trading. Once you have that it may be possible.
     
    tobe and Terry_w like this.
  6. Redom

    Redom Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    4,607
    Location:
    Sydney (Australia Wide)
    Try Bluestone, they accept 3 month ABN and have a ‘can do’ attitude to short term self employed. A couple other smaller specialist lenders too. Getting to 12 months will open up low doc options too and reduce rate premium 100 or so bps.

    But...

    LVR may be a problem, and if it isn’t, they will charge you to tears (7+, high risk fees, 1-2% app fees).

    Essentially it’s a short term play until you can meet income evidencing requirements of other lenders and refi back there.

    Those may be your best current options...which may naturally lead to waiting a bit longer
     
    Scott No Mates and Terry_w like this.
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Income of 18k is good for a new biz

    whats the nett taxable on that

    ta

    rolf
     
  8. Colin Rice

    Colin Rice Mortgage Broker Business Member

    Joined:
    9th Jul, 2015
    Posts:
    3,183
    Location:
    Perth
    What is the profit before tax on that?
     
  9. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,561
    Location:
    Adelaide, SA
    Who do you currently bank with?
    Is your banking for personal same as business?
    Does all of your trading go through your business account?
    What industry were you previously in?
    If you were previously in same industry is your current income similar?
    You state 'we' when talking about what you will need, is this a partner, if so what do they do? working?
    Net profit is the key, along with some expenses which can be added back.What do you expect your profit to be EOFY?
     
  10. izzy16

    izzy16 Well-Known Member

    Joined:
    12th Oct, 2016
    Posts:
    80
    Location:
    Sydney
    About 98% of that is profit. Internet consulting business, so very few expenses aside from some online subscriptions for tools and such like Xero, Skype etc.

    I've been in this same line of work for 10 years. Married with one 2-year old son. Wife doesn't work. My personal account + business trading account flows through Commonwealth Bank.

    Thanks to all so far for your input.
     
  11. izzy16

    izzy16 Well-Known Member

    Joined:
    12th Oct, 2016
    Posts:
    80
    Location:
    Sydney
    I just spoke to a broker who said CBA only assesses 40% of your turnover for servicing. This would mean that even though I net over $210K per year, they'd only count around $80K of that.

    Does anyone know if other banks/lenders are more lenient on this? Even at 60% I think would be enough for us.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    LVR will definitely be an issue with Bluestone, they have a max 80% LVR.
     
  13. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,561
    Location:
    Adelaide, SA
    I would speak with CBA after EOFY, I've got a reasonable amount of these approved. And would be surprised if you couldn't get it done.
    Ideally would want to have
    - Last couple years tax returns showing similar industry/income
    - 2018 FY Tax Return showing good profit
    - Income into business account matching the tax return
    - 80% LVR would be ideal, but might have chances above, I would try above first and look at 80% as a Plan B
     
  14. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    1,648
    Location:
    Sydney
    This is an excellent thread to highlight one of ANZ's major niche's. Firstly though it is highly unlikely that you will be able to get this loan approved in LMI territory especially with credit's general lending appetite.

    If you are able to get the LVR to 80% then you can possibly utilise ANZ's niche in the self employed space.

    Via their business banking credit arm you are able to get this loan done without having the ABN registered for 2 years. You can even set up business facilities (doesn't sound like you need those though).

    From a servicing/borrowing capacity perspective we would need your Accountant to prepare cash flow forecasts for the business to illustrate revenue and associated expenses. We would need the same or similar line of work which looks like you tick the box.

    The product and rates would be standard resi products/rates and not commercial rates.
     
    Paul@PAS and Terry_w like this.
  15. izzy16

    izzy16 Well-Known Member

    Joined:
    12th Oct, 2016
    Posts:
    80
    Location:
    Sydney
    I can definitely get to 80% LVR no problem.

    The servicing/borrowing capacity is my main concern, considering CBA only looks at 40% of turnover that is a massive hit to my borrowing power.

    This particular ANZ product, does it assess turnover similarly? Or a different percentage?
     
  16. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    1,648
    Location:
    Sydney
    The servicing is based on the cashflow projections that your Accountant will prepare.

    So the Accountant will (and im simplifying it here) say based on current incomes and expenses we anticipate that the income will be say $200,000 and then expenses $50,000 therefore a profit of $150,000. ANZ will work off this figure for servicing they won't apply any shading to this figure.

    You need to ensure that your application is well presented and you are covering all angles. I would personally want a business plan done as well. This would present very nicely to credit.
     
    Paul@PAS and izzy16 like this.
  17. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,561
    Location:
    Adelaide, SA
    Have you found a property you're wanting to buy now?

    I seriously don't think you would have to much trouble borrowing EOFY
     
  18. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,814
    Location:
    Melbourne
    There might be a misunderstanding here. Your turn over is gross, before expenses and taxes.

    Your referring to ‘net over $210k’? Is this $210 net of expenses? Tax? Is it just the financial year so far or has it been extrapolated to the end of June?
     
  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Lo doc policy i expect being quother there

    ta

    rolf
     
  20. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    If OP had that, I expect almost all lenders would do the loan at 80 % lvr...............

    ta

    rolf
     

Buy Property Interstate WITHOUT Dropping $15k On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia