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Finding a home loan when you’re self-employed.

There are many perks to working for yourself, but when it comes to applying for a home loan, it seems being your own boss sends up a red flag to banks and other lenders. Why? A salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contractor, entrepreneur, tradesperson or freelancer.

Yet by being proactive and accessing specialist advice, self-employed applicants can also enjoy a successful and hassle-free road to securing a home loan. Try these top tips for starters.


1. Seek expert advice

Trying to navigate the home loan landscape solo may not produce the outcome you desire. There are many experts who can help self-employed people access a home loan, and a mortgage broker is a good first port of call. They will be able to provide you with an up-to-date overview of which lenders on their panel are most comfortable lending to the self-employed, and also explain what sorts of loan products are available. They can also provide valuable advice around the sort of documentation you will need to have ready before you submit your application.


2. Get your affairs in order

Many lenders will lend to self-employed borrowers who provide their full business financials. This generally includes your personal and business tax returns for the past two years. If you have these documents on hand – and they reveal a fairly consistent income – applying for a loan should be relatively straightforward.

However, the hectic schedule that comes with running your own business means many self-employed borrowers’ tax returns are not up to date. If you have time on your side, consider working with your accountant to lodge your outstanding returns. If you’re in a hurry, you may wish to explore the option of applying for a low doc loan.


3. Consider a low doc loan

Low doc loans are offered by a wide range of lenders and, as the name suggests, require less documentation than traditional loans. Many low doc loans only require 12 months of business activity statements instead of full financials, for example. A downside of some low doc loans is that they may only be available at a lower loan to property value ratio (LVR), which means you may need a larger deposit.


4. Do your homework

Checking your credit history is a good step for anyone applying for a home loan. If you’re self-employed, it’s definitely worth taking the time to make sure your credit history doesn’t include any defaults or errors – these can hold up your loan application if they are not rectified in advance.

Taking the time to work out exactly how much you’d like to borrow is also a good idea. That way, you can hit the ground running when you meet with lenders or your mortgage broker.


5. Think outside the square

It may be possible to apply for a home loan using a Certificate of Income Declaration – a document that verifies your income and is signed by your accountant. It’s wise to consult a mortgage broker before applying for a loan in this way, as he or she can advise which lenders will accept an income declaration. It should be noted, however, that applying for a loan using such a document may mean that the required LVR (the portion of the property value you can borrow) may be lower, so you may need a larger deposit.

While it’s a little more complicated for self-employed borrowers, getting a home loan can be easier than you’d imagined with a mortgage broker in your corner. Speak to your broker to find out how a broker could help you secure a home loan.

Source: PLAN Australia: Your Loan Hub

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Factors to consider on whether to renovate or to sell.

Three Factors to help you make the right decision

Every home owner has been there. You look around your home and try to decide: are you better off renovating the home you have or selling and purchasing a new home? While the decision is very individual, these are a few of the most important factors to consider.


Is your current home livable?

Sometimes renovations are about aesthetic appreciation; other times, renovations are what make a home livable. If your family has increased in size, for example, there may be no way to renovate your home and make it workable. If you merely want a nicer, more up-to-date kitchen, however, selling and repurchasing is a different consideration.


How much hassle are you willing to endure?

A renovation, whether you decide to do it yourself or hire professionals, is quite a project. If you’re going DIY, you spend a lot of your free time working on projects around the house. If you’re hiring professionals, you have to work around their schedule and often take time off work to monitor their progress. Selling and purchasing, on the other side, will require looking at new homes, working with a realtor, and may still require some fixing up at the end.


What is the state of the market?

If your current home is nearly paid off and the housing prices in your area have increased, selling may give you additional capital, which can allow you to get a better home and make a profit. If housing prices in your area are falling, however, selling your home may cause you to lose money and may be a bad idea unless you have no other choice.


How much longer do you intend to stay in your home?

If you are a family of four, but your two children are soon going to be going to university, it may make sense to hold off for a few more years, then downsize your home. On the other hand, if your children are already out of the house or you don’t have children, but an elderly relative may need to move in soon, you may need more space very quickly.

No matter what you choose, you should have clear and open dialogue with your family. Discuss what the best option is for everyone. And remember to consider: some renovations may make it easier to sell your home down the road

 

Article source here.

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Don’t skip this talk with your parents

It’s probably going to be among the tougher conversations you’ll have with your mum and dad but it’s one of the most important. Discussing your parents’ financial affairs with them to ensure they are protected as they age can be a delicate conversation but it shouldn’t be avoided.

Protecting their assets, understanding how the pension works and arranging who they would like to handle their money should they be unable to are all things best worked out while they are in good health. Seniors Rights Service solicitor Tim Tunbridge says it’s important older people understand the rules surrounding divestment of assets and how that can affect their pension entitlements.

Any verbal family agreements, such as a person selling their home and then investing and living in a granny flat on their adult children’s property, should be formalised to ensure the elderly person is protected should a relationship turn sour, he says. “A great deal of care needs to be taken when entering into an arrangement like that,” Mr Tunbridge says. “There needs to be independent legal and financial advice to ensure that if the relationship breaks down in the future or something unforeseen happens that the older person can get their money back.” Mr Tunbridge said older people should also be wary of putting their house up as a guarantee for things like their children’s business ventures.

“Not only can people lose their house if the business fails but at the point where the bank or financial institution calls in the loan then Centrelink will deem that payment under the guarantee to be a gift, and they can lose part of their pension as well,” he said. For aged pension recipients, the maximum fortnightly payment to a single person is just over $800, while the most couples can be paid is around $600 each. However how much aged pension a person can receive depends on the value of their assets, excluding the home in which they live, and how much income they are receiving from investments.

Another important thing to plan for is the type and cost of care your parents may need and this can range from in-home support to staying in a residential aged care facility. The cost of care, which is typically shared between the receiver and the federal government, can range from around $1,000 each year for basic at home support to tens of thousands of dollars annually for residential aged care, according to the Productivity Commission.


IT”S TIME TO TALK WITH YOUR AGEING PARENTS

– Ensure they have an updated will prepared by a lawyer.

– Arrange an enduring power of attorney. This is a legal document where your parents choose someone to manage their assets and financial affairs if they are unable to do so themselves due to illness or an accident.

– Your parents can also choose an enduring guardian, who is someone with the authority to make lifestyle decisions on their behalf if they lose capacity.

– Discuss what your parents preferences are should they need home support or other care options.

 

 

By Melissa Jenkins, Australian Associated Press; more sources: www.humanservices.gov.au/individuals/older-australians, Caring for Older Australians, Productivity Commission Report 2011, www.australia.gov.au, www.moneysmart.gov.au

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