Why Lenders Ask for Income Proof
When you are self-employed, lenders cannot simply check payslips to confirm your income. Instead, they typically rely on a set of documents that show your business income over a period. This helps them assess your repayment capacity – that is, whether your income is stable and sufficient to cover a home loan.
Key Documents to Prepare
Business Activity Statements (BAS)
Lenders often request your BAS statements, usually for the last two years, to see your declared business income. These are submitted to the ATO and provide a consistent record of your business revenue and GST obligations.
Accountant’s Letter or Financial Statements
Many lenders will ask for a letter from your accountant, or formal financial statements such as profit and loss (P&L) statements or a tax return. The accountant’s letter can confirm your income level and note any non-recurring or unusual items in your business finances.
Bank Statements
You will typically need to provide personal and business bank statements – often for the last three to six months – to substantiate your income deposits and show that your business income actually flows into your accounts.
How Lenders Assess Repayment Capacity
Lenders use the income evidence to calculate your serviceability – that is, your ability to make loan repayments. They may average your income over two years, apply multipliers for income stability, and add back certain business expenses. Part of the assessment also involves checking that the income is sustainable and not reliant on one-off transactions. The exact method varies between lenders, but the goal is to ensure the income you declare is a reliable basis for a long-term loan.
Talk to a Mortgage Broker
Navigating the documentation for a self-employed home loan can be complex. A mortgage broker can help you prepare your income proof and match you with lenders that have suitable policies for self-employed applicants. They can also guide you through the assessment process to improve your chances of approval.