Applying for a home loan when your income is complex
If you are self employed, run a company, or earn through a mix of salary, dividends and trust distributions, a knock back from one bank tells you very little. Lender policies on complex income differ enormously, and knowing which door to knock on is most of the work.
Why standard assessments do not fit
Lender systems are built around a payslip. When your income arrives as business profit, retained earnings, distributions or a mix of all three, the assessment becomes a matter of policy interpretation rather than arithmetic. Two lenders looking at identical financials can arrive at very different borrowing capacities.
What lenders are actually looking for
- Consistency, usually two years of financials, though some lenders will consider one
- Add backs, such as depreciation, one off expenses and additional superannuation, which can lift your assessable income considerably
- Business health, including trading history and whether income is trending up or down
- Clean tax affairs, with lodgements up to date and no outstanding ATO debt
Where applications commonly come unstuck
Most declines we see are not about the numbers being weak. They are about the numbers being presented in a way the lender cannot work with: financials that are out of date, add backs that were never claimed, or an application sent to a lender whose policy was never going to accommodate the structure in the first place.
Low doc is not the only answer
Alternative documentation loans have their place, but they usually come with a rate premium. Before going down that path it is worth testing whether a full documentation loan is achievable with a lender whose policy suits you. Often it is.
How to prepare
- Get your lodgements up to date, personal and business
- Gather two years of financials and tax returns if you have them
- List anything unusual in the numbers, so it can be explained rather than discovered
- Avoid multiple applications across several lenders, which leaves a trail on your credit file
The value of picking the right lender first
We know the lender policies that accommodate complex income and how to present your case so it is assessed on its merits. If your income does not fit a standard profile, that knowledge is worth considerably more than a sharp advertised rate you cannot access.
Start with our borrowing capacity calculator for a rough figure, then let us pressure test it against real lender policy.
This guide provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
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