Advice matters
What you need to know about applying for a home loan if you’re self-employed

According to the World Bank approximately 20% of the New Zealand population is self-employed, a figure which is high by international standards. While that may speak to the country’s entrepreneurial spirit, when you are applying for a home loan it can add an extra level to the process.

But applying for a home loan as a business owner or sole trader is possible, and a good adviser can help you to navigate lenders’ requirements.

Here are some points to consider.

Prove your income

The lender will usually require you to provide sufficient financial accounts to show that you are drawing enough income from your business to service your home loan. Typically, this involves providing two years’ worth of financial statements to demonstrate how the business is running and the income you are drawing from it.

These statements will often include:

  • A balance sheet
  • A profit and loss statement
  • A cash flow statement
  • Any relevant contracts that show continued or increasing income in future, if necessary.

This is information that your accountant may hold about your business, but as advisers we can help you to work out what paperwork you need to assemble.

Business plans

A lender offering a home loan is potentially entering into a long-term financial relationship with you, and as such they may have questions about your business and its revenue potential. It’s important to be upfront, including about any challenges that might be ahead.

They may require details about your background in the industry, and the connections and experience you have, to assess how financially stable you are likely to be.

If you know there are aspects in your financial statements that could raise concerns, it may help to be prepared to provide insight into your plans and goals for your business growth.

If you have other significant investment assets, you can also detail these in your application.

New businesses

Securing a home loan can be more challenging if your business is new. But that doesn’t mean it’s impossible.

Demonstrating to the lender any contracts you have with key customers can help bolster your application, and your accountant could put together a cashflow forecast to give a sense of how your business should perform in future.

A different approach may be required, at least initially. Your SHARE adviser can help you work out which approach might be the right fit for you now and into the future.

Like to talk?

Whatever your business or employment structure, if you’re looking to arrange a mortgage or have more general questions about home lending – get in touch with your SHARE adviser. We can help you streamline the application process and find the right solution for you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.