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Mortgages for Company Directors and Sole Traders

Being a sole trader or a limited company director can bring challenges when it comes to applying for a mortgage, but getting a deal that works for you is simpler than it seems.

If you are a company director or a sole trader looking for a home loan, this blog can help you be a boss and own your own home. In this blog, we’ll look at how to demonstrate your income, the importance of understanding your financial situation, and the benefits of working with a mortgage broker.

Demonstrating your income

Working as a company director or a sole trader means your income is likely less straightforward than someone in regular employment receiving a payment summary each year. Your income may be received as dividends, trust distributions, directors fees or other forms of income from fluctuating profits. These fluctuations in the profits of your business and consequently your income may be frowned upon by lenders as your income is difficult to prove.

How can you demonstrate your income to mortgage lenders? Easiest way is to ensure you are keeping a good accounts system like Xero or MYOB. If you have to produce a BAS every quarter, this is likely something the bank will want to see. Other documents lender will want to see include your tax returns, ATO running balance accounts, bank statements, financial statements prepared by a tax agent and projections of future income. Some lenders require borrowers to have been self-employed for a certain period and may require larger deposits than people under regular employment.

Understand your financial situation

Before applying for a mortgage, you should understand your own financial situation. Review your financials and financial position of your business and ensure you can discuss this with a lender. A mortgage broker can assist with this positioning.

Owning a business with unencumbered assets or having assets such as commercial properties can be looked favourable upon by mortgage lenders.

By factoring in your expected monthly mortgage repayments into your budget you can ensure that the home loan you select is affordable and suits your financial situation. It may be worth getting pre-approval to ensure you know what you can borrow before jumping into house hunting.

Working with a mortgage broker

Working with a mortgage broker can be beneficial for company directors and sole traders. A mortgage broker can assist you assembling your financial information and setting it out how a lender would prefer to see it to assess whether they will lend funds to for your home loan.

Using a mortgage broker can make it easier to shop around and compare mortgage products. Some lenders are easier to work with for mortgages for self-employed or directors than others. A mortgage broker can provide assistance, finding lenders that are more likely to take on a borrower given their current self-employed arrangements.

Mortgage brokers offer their experience and expert advice to help you understand the different loans that are available on the market. Mortgage brokers work with you to create personalised solutions to suit your mortgage needs. The best part of working with a mortgage broker is you don’t need to pay them. The mortgage lender pays the mortgage broker a commission for bringing in the borrower. This gives you all the benefit or having someone on your team, with your lender paying them!

Need help with your mortgage?

Looking to purchase or refinance a home? One Click Life is a mortgage broker that can help you find a mortgage lender that suits your needs. We have a team of expert mortgage professionals to help you select the right mortgage. One Click Life can also take care of your Health Insurance, Will, and Taxes, so you can spend time on things that matter to you.