Self-employed home loans are assessed differently from loans for employees, so applying as a business owner, sole trader or contractor can feel more complex. Because your income may vary from year to year, lenders can see you as a higher risk. However, if you have run your business or contracted for two years with a relatively stable income, you can still put forward a strong application. If you have been self-employed for less than two years, you may still have options.
Below we look at what lenders consider when they assess your application, how much you may be able to borrow, and ways to strengthen your position.
One thing I hear often from self-employed clients is that they’ve felt misunderstood by lenders or previous brokers who couldn’t quite grasp how their income worked. I ran a multi-site retail business myself from 2016 to 2024, and I studied business administration and accounting at university, so this is an area where I can genuinely add value: not just as a broker, but as someone who has lived the self-employed experience first-hand.
Verifying self-employed income isn’t simple. Each lender sets its own rules on what it accepts and which documents you must provide to verify your application, and these requirements can vary widely between lenders or even across different products from the same lender. We recommend talking to us about your borrowing power as a starting point, but you can use the calculator below for a quick estimate.
What Documents Do I Need to Provide When Self-Employed?
The documents you need vary by lender, and they help the lender determine your average income and ability to repay the loan. If you are a sole trader, we collect your latest one-year personal tax return, your latest ATO notice of assessment and either 12 months’ Business Activity Statements (BAS) or a second year’s tax return.
Lenders may also ask you to provide bank statements that show your saving habits. To complement this, you will also need to provide two forms of identification, one of which must include your current residential address.
The lender will want to know about your assets (such as cars), superannuation balance and investments (such as shares), as well as liabilities such as credit cards, loans or debts. You will also need to provide a breakdown of your regular expenses, including groceries, insurance premiums, utility bills, transport, entertainment, clothing, childcare, and subscriptions.
If you have already signed a contract to purchase a home, you will be required to provide the contract to the lender, and some may also require evidence you have taken out building insurance on the property.
What Expenses Do Lenders Consider?
Lenders consider your ongoing personal and business expenses when they determine whether you can comfortably make your repayments. They may add back one-off expenses, such as buying a car or making extra super contributions, because these costs don’t recur and won’t affect your future income. Your broker can speak with you about which expenses the lender may add back to increase your annual income.
Tips to Strengthen Your Application
If you’re looking to apply for a home loan as a self-employed person, there are a few considerations that could help strengthen your application.
- Wait until your business has been operating for at least two years and you have been receiving a stable income.
- Provide documentation of tax write-offs, depreciation, superannuation contributions, interest repayments on loans and one-off purchases that the lender may add back to your income.
- It could help to provide information on your employment prior to becoming self-employed, including income, to demonstrate expertise or the potential to return to another job should your business experience troubles.
- Try to save at least a 20% deposit to show strong saving ability and avoid paying Lenders Mortgage Insurance (LMI).
- Check your credit report and ensure it is correct. If your credit score is low, consider ways to boost it prior to applying. Your broker can help you with this.
Another way to help strengthen your application for a loan is to have a broker on your side. A broker understands the requirements of different lenders, helping find the right solution for your needs.
Self-Employed Home Loans in Sydney & NSW
Whether you’re a sole trader, contractor, or business owner in the Sutherland Shire, greater Sydney or anywhere across NSW, getting a home loan when self-employed is very achievable for many borrowers. It just requires the right preparation and a broker who understands how lenders assess non-traditional income. We also help self-employed clients across Australia by phone and video.
At Ingram Financial, we regularly work with self-employed borrowers, helping them navigate lender requirements and find self-employed home loans that fit their situation.
What Is a Low Doc Home Loan?
A low doc (low documentation) loan is designed for self-employed borrowers who can’t provide the standard two years of tax returns that most lenders require. Instead of full financials, lenders accept alternative documents to verify your income.
Common alternative documents include:
- BAS statements: typically 12 months of Business Activity Statements showing consistent turnover
- Accountant’s letter: a declaration from your registered accountant confirming your income
- Business bank statements: usually 6 to 12 months showing regular income deposits
- Signed income declaration: some lenders accept a self-declared income statement
Low doc loans typically come with higher interest rates than standard loans. You’ll usually have the widest choice of lenders and the sharpest pricing at a loan-to-value ratio (LVR) of 60% to 80% or less. Some lenders will go above 80% on a low or alt doc loan, although you’ll have fewer options and rates tend to be higher. However, for many self-employed borrowers they represent a genuine and practical pathway into the property market.
What If I’ve Been Self-Employed for Less Than 2 Years?
Most lenders prefer to see at least two years of self-employment history, but being newer to self-employment doesn’t automatically disqualify you. Options that may be available include:
- One year self-employed: some lenders will consider applications with just one year of tax returns, particularly if you have a strong prior employment history in the same industry
- Previously employed in the same field: if you recently moved from employment to running your own business in the same profession, some lenders view this favourably as it demonstrates industry expertise
- Strong deposit: having a deposit of 20% or more can offset some of the perceived risk for lenders
- Alt doc lenders: specialist and non-bank lenders often have more flexible criteria than the major banks and may consider your application on a case-by-case basis
This is an area where having a broker is particularly valuable, as we know which lenders are more flexible and can match your specific circumstances to the right product.
How Do Lenders Calculate Self-Employed Income?
This is one of the most misunderstood parts of the self-employed loan process. Lenders don’t simply look at what you earn. Instead, they look at your taxable income and then apply a process called add-backs to arrive at a more accurate picture of your actual income.
Common add-backs include:
- Depreciation on business assets
- One-off large expenses (equipment purchases, legal fees)
- Additional superannuation contributions above the standard rate
- Interest on business loans
- Non-cash business expenses
For example, if your tax return shows $80,000 taxable income but you claimed $20,000 in depreciation and a $10,000 one-off equipment purchase, a lender may assess your income as closer to $110,000. Your broker will work through this with you before lodging your application to ensure your income is presented in the strongest possible way.
How Much Can I Borrow If I’m Self-Employed?
How much you can borrow when you’re self-employed comes down to one number: the income a lender is prepared to accept. Once that figure is set, the rest of the calculation works much as it does for an employee, with your living expenses, debts, deposit and the lender’s serviceability buffer all playing a part. However, each lender sets its own rules for self-employed income, so the same tax returns can produce quite different results. In short, borrowing power on self-employed home loans varies by lender.
Full Doc or Low Doc?
Most self-employed home loans are full doc loans, where the lender verifies your income with tax returns and ATO notices of assessment. Many lenders ask for two years of returns, while some will accept one year. Low doc (or alt doc) loans rely on BAS statements, business bank statements or an accountant’s letter instead, and they usually come with a higher rate. The most options sit at LVRs of 60% to 80% or less, although some lenders will go above 80% with fewer choices and higher pricing. As a result, full doc is generally the better path once your returns are lodged and show the income you need.
Averaging Versus Your Latest Year
When you provide two years of returns, lenders take different approaches. Some average the two years. Others use your most recent year when income has grown, while many use the lower year when income has fallen. Lenders also add back certain expenses that reduce your taxable income but not your ability to repay, such as depreciation, some interest costs and genuine non-recurring expenses. What counts as an add-back varies by lender, and our guide to how lenders calculate your income explains the common approaches.
Sole Trader, Company or Trust
For sole traders, lenders usually work from your personal tax return, where business profit shows up as your income. If you trade through a company, they typically look at the wages or director’s fees you draw and, with some lenders, your share of company profit, so they will want the company’s financials too. For a trust, lenders generally consider the distributions paid to you. Because structures can get complicated, bring your accountant’s latest financials to our first conversation.
A Worked Example (For Illustration Only)
Take a hypothetical sole trader with round numbers: taxable income of $90,000 in the first year and $120,000 in the second, plus $10,000 of depreciation and one-off expenses added back in each year. That gives $100,000 and $130,000 once the add-backs are included. A lender that averages both years would assess about $115,000, while a lender that uses the latest year would assess about $130,000. That $15,000 gap in assessed income can noticeably change how much you can borrow. These figures are made up to show the method; they are not a quote or any lender’s policy.
How to Improve Your Borrowing Power
- Lodge your latest tax return promptly, especially if it is your strongest year.
- Keep your ATO lodgements and payments up to date, since lenders often ask about tax debts and payment plans.
- Reduce or close credit card limits you don’t use, because many lenders assess the full limit rather than the balance.
- Talk to your accountant before 30 June if you plan to buy soon. Minimising tax and maximising borrowing power can pull in opposite directions, something I saw first-hand as a business owner.
- Compare lenders, not just rates. Our post on why different banks give different borrowing capacities explains why the gap can be large.
Then test your numbers in our borrowing power calculator, using the income you expect a lender to accept, and talk to us about which lenders offer self-employed home loans that treat your income most favourably.
Frequently Asked Questions
Yes. Being self-employed doesn’t prevent you from getting a home loan. Lenders simply assess your application differently, focusing on business financials, tax returns, and BAS statements rather than payslips. A mortgage broker can help you find lenders whose criteria suit your situation.
Most lenders require two years of personal and business tax returns, along with ATO notices of assessment. Some lenders will consider one year of returns in certain circumstances, particularly if you have strong prior employment history in the same industry.
For standard loans with full documentation, rates are generally the same as for PAYG borrowers. Low doc loans usually attract a higher rate, depending on the lender and LVR. As your documentation improves over time you can often refinance to a standard loan at a lower rate.
An addback is a business expense that a lender adds back to your taxable income when assessing your borrowing capacity. Things like depreciation, one-off purchases, and extra super contributions are common add-backs that can meaningfully increase your assessed income and therefore your borrowing power.
Documents, Sole Traders and Using a Broker
Some lenders accept BAS statements as an alternative or supplement to tax returns, particularly for alt doc or low doc products. Typically 12 months of BAS statements are required, and they need to show consistent business turnover that supports your declared income.
Significantly. Lender policies for self-employed borrowers vary enormously, and what one lender declines another may approve. A broker knows which lenders are flexible, how to structure your application, and how to present your income in the most favourable way. That can make a real difference to the outcome.
Yes, the same general principles apply to sole traders as to company directors or business owners. The main difference is the documentation: as a sole trader you’ll typically provide personal tax returns and an ATO notice of assessment rather than company financials.
Borrowing Power FAQs for Self-Employed Home Loans
A standard borrowing power calculator works for sole traders if you enter the right income. Use your taxable income plus likely add-backs such as depreciation, averaged over two years if your income has been uneven. Treat the result as a guide, because each lender assesses income for self-employed home loans differently.
Lenders use your profit, not your turnover. For full doc loans that generally means your taxable income plus any add-backs the lender accepts. For low doc loans, BAS statements or an accountant’s letter are used to support the income you declare.
It can. Lenders assess the income shown on your tax returns, so deductions that reduce your tax can also reduce your borrowing power, although some expenses may be added back. If you plan to buy in the next year or two, talk to your accountant and to us before you lodge.
The information on this page is general in nature and does not take into account your objectives, financial situation or needs. Lending criteria, fees and charges apply. Consider whether it is appropriate for you and speak to us for advice specific to your situation. Speak to your accountant or tax adviser about tax.
Need Some Help?
Not sure where to start? That’s exactly what we’re here for. Drop us a message and we will get back to you within one business day with clear, honest advice tailored to your situation.