
Let me start by clearing up a big misunderstanding around home loans for self employed—this is why I write.
Working for yourself…..
Does not mean you have to get a low doc loan.
Does not mean banks don’t want to deal with you.
Does not mean you have to pay higher interest rates.
Does not have to mean you need a much bigger deposit.
Does not mean you cannot access the same loans as others.
What is a self employed home loan?
A self employed home loan is not a specific lending product. Rather a reference to the lending rules and policies that guide banks when they assess home loan applications for business owners.
Self employed home loans often get branded as difficult and time-consuming. It does not have to be this way.
Given more than 10% of workers in Australia operate as owner-managers (Ai Group 2021), I have put together some information on how self employed home loans work and how to improve chances of a home loan approval.
How do lenders treat home applications for self employed?
In a word—differently.
Lenders are not always aligned in the way they assess self employed borrowers—a cause of great confusion.
When the borrower and lender are not a good match, applications become difficult, time consuming and likely to be unsuccessful.
If you understand that lending guidelines vary, just as self employed circumstances do, the home loan application process can be a smooth and ultimately successful experience.
The work is in researching which lender can meet your needs and objectives. This a better chance of a positive outcome than squeezing an application into a bank policy not built for it—as often happens when borrowers chase home loan promotions. The aim is to avoid a square peg-round hole situation.
Do lenders want self employed borrowers?
I often hear “banks don’t like self employed home loans”—this couldn’t be more incorrect.
Banks work hard to attract self employed borrowers.
Sure, applicants with permanent employment take less time and resources to assess. That is because the assessment is confined to the person and assumptions are made that the business they work for is in good shape and will continue to fund their employment.
If someone had a bad home loan application experience it is easy to blame the bank. But maybe they were never a good fit? Maybe the application should never have been made?
Some lenders and mortgage brokers are better equipped to assist with home loans for self employed. It requires an in-depth knowledge of bank policy as well as an understanding of customer needs to find the right fit—like horses for courses.
The business case for lenders and self employed home loans is clear—every home loan approval is a chance to further develop a deeper banking relationship. Think of all the add-ons. Business owners might also need business accounts, business credit cards, even car loans.
Lenders are ready and willing to take on self employed home loans that meet their criteria.
Self employed home loan vs standard home loan
A self employed home loan application shares many similarities with that of a standard home loan (made by an employee as opposed to a business owner).
The central part of both home loan applications will be for the lender to understand the income and expenses of the applicant. Once known, they can work out the surplus income available to support a new home loan.
So, both types of home loan applications are the same, in that the borrowers need to pass affordability tests.
How lenders calculate income and expenses is the difference—and often misunderstood.
Income for self employed home loans
The main difference in how self employed home loans are assessed relates to the income assessment—but this is not a challenge unique to self employed.
Income assessments vary depending on how you receive your income. Think about the different income types for a minute—rental income, income from shares, commission, bonus, overtime, day rates, casual jobs, government benefits, and more.
Each of these will require different types of evidence to support using this income in a home loan application.
So, how is the assessment for a self employed home loan different?
When a lender looks at the income available for a self employed home loan they make two assessments—one on the business and one on the business owner.
This differs to a home loan application by a permanent employee (most borrowers)—only their personal position is assessed.
So, home loans for self employed people require some additional paperwork. This is because the lender needs to assess the capacity of the business to continue to pay its owner, in addition to the business sustaining itself.
Some self employed business owners mistake the extra paperwork as an unnecessary obstacle put in front of them —it’s not. A lender cannot advance a home loan without knowing the business is in good health, just as you cannot build a house without foundations.
So, rather than feel that lenders are not interested in self employed home loans, consider yourself valuable. You just need to understand your loan application needs to be presented in a clear and comprehensive manner—consider using someone to assist with appropriate skills and experience.
Why the extra paperwork?
A business owner has more financial and legal responsibilities than an employee. A business owner can control the direction of a business as well as any payments made from the business.
Expenses for self employed home loans
Expenses need to be reviewed for any home loan application, self employed or otherwise.
In the case of a self employed home loan, the lender also needs to consider the expenses of the business. There are many variations to how lenders do this. Essentially, enough business income needs to be set aside to take care of any business commitments—like a business loan.

Are self employed home loans risky?
For you or the bank?
There is a borrower risk.
You know your business better than anyone and will understand any risks that lenders and mortgage brokers might not foresee.
For example, if you lost a big customer today you might expect less revenue this year. The lender cannot see this because the financial information they have is looks backwards not forwards. The result might be that you earn less income than what any historical financials show.
An approval for a self employed home loan is one thing, but you need to carefully consider any risks of your own before accepting a loan offer.
There is the lender risk.
When you work with a lending professional, they will assess the suitability of any home loan against your individual circumstances. A lender will check the application meets policy and once they are happy with the level of risk, the home loan is approved.
Lenders consider a home loan for self employed risky if they are short on information—according to their own lending guidelines. If you cannot meet all lender requirements then an approval, while not out of the question, might require some changes to the proposal to reduce lender risk—like requesting a larger deposit.
Are self employed home loans different to business loans?
Yes – these are very different.
A self employed home loan, when for residential purposes, is regulated in Australia. For majority of home loan purposes, the borrower should be protected by all the rules and regulations that govern home loans.
A home loan for self employed can have a long term, say 30yrs, without any need to review your financial position—ever. That is, unless you ask the bank for something that requires another look at your financial position—like extra money for renovations.
Business loans for self employed on the other hand, fall outside the highly regulated home loan world. They are for business and not residential purposes. They are commonly for shorter terms and often require regular reviews of business financials.
So, a self employed home loans is when a business owner has a home loan for residential purposes—like buying a home or investment property. The only business-related aspect is that is where the income stems from.

Are loan products the same for self employed?
Mostly—Yes. They often have more options.
Many lenders offer the same products as they do for standard home loans. In fact, self employed borrowers can access some home loan policies that standard applicants cannot.
Low doc home loans
Low doc home loans are specifically designed for the self employed. They are mostly offered by lenders who are considered alternatives to the major banks in Australia.
They provide business owners an alternative route to a home loan application if they have not got the standard documents used to verify their income.
Applications can sometimes be submitted relying on one or multiple points of information instead of the traditional tax return and financial statements. Examples of documents expected from these lenders are:
- Bank trading statements
- Accountant declarations
- BAS Statements
Given this is less documentation than considered standard, there is a risk that these lenders are not seeing the full picture. So, a solution for the lender is to add margins to some aspects of the loan to cover the extra risk they are taking. They may ask for a higher than usual deposit, and often apply premiums to interest rates, application fees and risk fees.
If you think a low doc home loan is the only option for you, find a good mortgage broker. Explore all your options thoroughly before assuming being self employed limits your home loan options—it doesn’t always have to.
What helps a self employed home loan get approval?
Given it takes time to prepare a self employed home loan application, preparation is key for an approval. Here are some items that should be addressed in addition to a typical home loan application.
Financial history that makes sense
Financial history that covers two full financial years is the industry standard for self employed home loan applications. If there are significant changes between the two years a lender will expect some background explaining them. A lender will often try to understand the borrower and the business behind them.
It often happens that you do not quite fit the “industry standard”, so two years of financial history might be a challenge to produce. While lenders are known for their checklists and procedure, there are some who are willing to try and understand the borrower’s position further—does this income make sense and is it sustainable?
Upfront credit check
Lenders use your credit report to help assign a credit score to you as part of your home loan application. They use this to check your credit activity and get a sense of how good a borrower you will be.
Many home loan applications for self employed can take longer than they should to process because there can be significant cross-checking to confirm the information received on your credit reports.
A sensible thing to do is to order yourself a free credit report so you understand what your lender might see. A credit report will include your credit activity like applications made, outcomes and conduct. As a business owner it might also include any director roles you hold. A lender will want to explore these further if they have not been addressed in an application.
If you know what the lender will see in your credit report, you can address any queries they will likely have with you mortgage broker at the beginning of the process. This makes for a smoother application when compared to a yo-yo experience.
Getting your credit report and credit score before you make a home loan application is a great way to prepare.
Staying on top of things
Lenders rarely ask for more information than what a business would normally need to do as part of good business practice.
They will usually need the business to stay up to date with lodging paperwork (BAS statements and tax returns) to the Australian Tax Office (ATO).
They would expect ATO and other commitments to be up to date.
Use an accountant
Using an accountant for your business gives a lender confidence that you have professional oversight and guidance along your business journey. Accountants can also be called upon to provide explanations that support lending applications.

Frequently Asked Questions
Do banks lend to self employed?
Yes. There are many Australian banks who can arrange self employed home loans.
A self employed person usually needs to provide business-related financial information for a bank to understand their income position. This can put them one step closer to a home loan approval.
What documents are needed for a self employed home loan?
The documents needed are similar to a regular home loan except for some additional business related documents such as:
– Financial statements
– Tax returns
– ATO Notice of Assessments
– Recent Business Activity Statements (BAS)
– Statements for liabilities
Some lenders may want all of these—some need none. This is where a mortgage broker may help you choose a lender with a policy that suits your circumstances.
Can I get a mortgage with less than 2 years self-employment?
Yes. Some Australian banks will consider a home loan for individuals with less than two years self-employment.
Some lenders might consider approving a home loan with less than two years self-employment if they see extra strength in other areas of the application—like deposit size.
Can I get a mortgage being self employed for 6 months?
Unlikely.
Six months financial history does not usually establish enough of a financial record for a lender to understand the financial position for most self employed individuals. However, some lenders might consider approving a home loan based on 12 months self-employment if other areas of the application are particularly strong.
Can a sole trader get a home loan?
Yes.
A sole trader is considered self employed. So, provided they can show a bank any required financial records, their income from sole trading can be considered when making an assessment for a home loan approval.
Why use a mortgage broker for a self employed home loan?
A mortgage broker with the right skills and experience will be able to perform a thorough assessment for a self employed home loan before an application is made to a lender.
Sometimes a bad experience is not the fault of the bank or borrower. It might just be that the loan application should have been made to another lender—or not made at all.
A good mortgage broker will also be able to set realistic expectations about around the documentation and timeframes involved in the home loan application process.
Final word
Self employed individuals have access to the same home loan products as everyone else. They just need to be prepared with the documents to support their application. The earlier the better.
Use a professional early so you are aware of what business activities might affect your future home loan application.