Cracking the Code: A Guide to Home Loans for Self-Employed Borrowers

Self-employed lending can be a little more complex. But with the right preparation, the right documents, and the right lender, you can absolutely secure a competitive home loan.

Being self-employed can be incredibly rewarding. You set your own schedule, build your business dreams, and enjoy the flexibility of being your own boss. But when it comes to applying for a home loan, many self-employed Australians discover that the road to approval isn’t quite as straightforward as it is for their salaried counterparts.

Banks and lenders often take a more conservative approach when assessing self-employed borrowers. That doesn’t mean it’s impossible—it just means you need to understand the rules of the game, especially the policies that different lenders apply to self-employed applicants.

In this article, we’ll dive deep into how self-employed lending works in Australia, what banks are looking for, and how lender policies can differ dramatically. Whether you're a sole trader, contractor, or director of your own company, this is your ultimate guide to securing a mortgage.

Why Is Lending Different for Self-Employed Home Loans?

Let’s face it: traditional employees present less risk to lenders. Their income is stable, predictable, and easy to verify through payslips and group certificates. On the other hand, self-employed income can fluctuate with the market, seasonal work, or business performance.

Because of this, banks often apply stricter rules to self-employed borrowers, such as:

• Requiring more documentation

• Asking for longer income history

• Averaging income over several years

• Applying income “shading” (discounting income)

• Extra scrutiny of business expenses and debts

But don’t worry—there are many lenders in the market that cater specifically to self-employed Australians, and some have surprisingly flexible policies.

Key Documents Lenders Want from Self-Employed Borrowers

Before we dive into bank-by-bank policies, it’s important to understand the standard documentation lenders will request. These documents form the backbone of your application:

Standard Document Checklist

1. ABN registration – You must have held an active ABN for at least 12 to 24 months, depending on the lender.

2. Two years of tax returns – Both personal and business (if applicable).

3. Notice of Assessments (NOAs) – From the ATO, verifying your declared income.

4. Business financial statements – Profit & Loss, Balance Sheet (if you're a company or trust).

5. BAS statements – Some lenders may ask for the last 2–4 quarters of Business Activity Statements.

6. Accountant’s letter – A letter from your accountant confirming income and business viability can be required or helpful.

Some banks may consider one-year financials, while others offer low doc or alt doc loans, which use different forms of income verification (e.g., BAS, bank statements).

Understanding Income Assessment Methods

Lenders usually take one of the following approaches when calculating your income:

• Two-year average – Adds up your net income from the past two years and divides it by two.

• Most recent year only – There are Some lenders that use just your most recent tax year if it's higher and stable. This can be an ideal policy for borrwers looking to maximise their lending capacity.

• Shading – Some banks discount self-employed income by 20–30% to be conservative.

• Add-backs – Banks may allow you to “add back” certain expenses like depreciation, interest, and non-recurring costs., but generally these concessions mean we have to take other liabilities into consideration and can nullify the add back income.

  
  

Low Doc vs Full Doc Loans

Full Doc Loans:

These are standard loans where you provide Full Documentation: tax returns, financial statements, and Notices of Assessment (NOAs). These loans generally offer the best rates and widest product range.

Low Doc (Alt Doc) Loans:

These are suitable if your financials aren’t up-to-date or don’t reflect your current income. The types of Alternative Documentation you may need to supply are:

• 6–12 months of business bank statements

• Business Activity Statements (BAS) lodged to the ATO

• An accountant’s declaration

Accountant Letters Used in Alt Doc Lending

When applying for alt doc (alternative documentation) loans, as a self-employed borrower, some lenders may accept an accountant’s letter in place of traditional financial documents like tax returns or BAS statements. However, not all accountant letters are the same—banks and lenders have specific formats, requirements, and levels of detail they expect, depending on their internal policies and the type of loan product being offered.

Note: Low doc loans are not “no doc.” Lenders still need to verify your income in some form or another.

How to Improve Your Chances of Approval

Here are some tips to increase your chances of loan approval as a self-employed borrower:

1. Get your financials in order – Lodge your tax returns on time and avoid large fluctuations in income.

2. Minimise unnecessary deductions – Especially in the years leading up to your application.

3. Maintain clean BAS and bank statements – Show healthy cash flow and responsible spending.

4. Keep business and personal accounts separate – Lenders want clarity in your financials.

5. Work with an experienced mortgage broker – A broker knows which lenders are flexible and can present your application strategically.

   
   

What About Newly Self-Employed Borrowers?

If you've recently transitioned to self-employment, your options may be limited with the big banks. Many lenders require a minimum of 12–24 months trading history. However, some lenders (especially non-banks) may work with you if:

• You were in the same industry previously as an employee.

• Your business has consistent income (backed by BAS or bank statements).

• You have a strong deposit (20% or more).

• You’re prepared to accept a slightly higher rate initially.

  
  

Final Thoughts: The Self-Employed Advantage

Yes, self-employed lending can be a little more complex. But with the right preparation, the right documents, and the right lender, you can absolutely secure a competitive home loan. In fact, many lenders recognise that self-employed borrowers often have greater income potential and asset wealth than salaried applicants.

The key is to understand lender policy—and work with professionals who do too. A good mortgage broker like Etairos Finance can save you time, money, and stress by matching your unique situation with a lender that understands the self-employed

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So if you're self-employed and thinking about buying a home or investment property, don’t let the paperwork put you off. Your business success can be the key to building your property portfolio—let’s make it happen.

Need Help?

At Etairos Finance, we specialise in self-employed lending. Whether you’ve been in business for 12 months or 12 years, we’ll match you with the right lender and help package your application to give you the best chance of success.