Why It’s So Hard to Get a Home Loan When You Work for Yourself (And What You Can Do About It)

How to Get a Home Loan When You’re Self-Employed

You’ve built something of your own—a thriving freelance career, your own business, or maybe both. You're earning good money, comfortably making your monthly repayments, and might even be doing better financially than many of your salaried mates. But when you sit down with a lender, suddenly your financial situation seems irrelevant.

They ask for payslips you don’t have and two years of personal tax returns that don't accurately reflect your true earning power—after all, your accountant has helped you legally reduce your taxable income. The banks don't understand your business structure or trust arrangements; it feels like they simply don't understand self-employed people at all.

This article is designed for everyone who has chosen self-employment, wants to enter the property market, and finally get a home loan without endless hurdles. It's not always easy, but it's absolutely achievable.

Self-employed and unsure where to start? Book a free strategy session with a mortgage broker who understands your financial status and what most lenders need to see.

Why It’s Harder for Self-Employed Borrowers to Get a Home Loan

When you're self-employed, the home loan process treats you differently. Unfortunately, approving self-employed loans remains tricky because lenders love predictability. They prefer neat, tidy borrowers with steady payslips and simple financial statements. If that’s not you, expect additional scrutiny.

Here's why it feels harder—and genuinely is harder—for self-employed applicants.

What Lenders Actually Look For

Every lender has unique criteria, but when assessing self-employed borrowers, there are four main factors lenders generally consider. Nail these, and you greatly improve your chance of approval.

Consistency of Income

If there’s one thing banks love, it’s predictable income.

Typically, lenders calculate borrowing power based on at least two years of tax returns demonstrating stable, or ideally rising, income. If you don't have two full years, at minimum they'll expect one year of personal tax returns combined with at least two years of having your ABN registered.

Why is volatile income an issue?
Lenders dislike seeing significant fluctuations. Big swings in income create uncertainty about your capacity to meet ongoing loan repayments, especially if your business has seasonal peaks and troughs.

Fortunately, a savvy mortgage broker can help lenders see beyond the volatility by clearly explaining your business's unique circumstances.

Your Business Structure

The way you structure your business—whether you're operating as a sole trader, company, or through a trust—greatly impacts how lenders assess your borrowing capacity.

Sole traders

Your financial documents and tax returns clearly link business income directly to your personal income, making the assessment relatively straightforward.

Company or Trust

These structures complicate things. Lenders will usually require both your personal and business financial statements and tax returns. Additionally, lenders can assess company directors harshly if your taxable income appears low due to strategic tax planning.

If your business structure includes intellectual property or complex setups (where intellectual property laws apply), make sure to clearly document how your business generates income.

Loan Servicing and Expenses

Loan servicing essentially asks, "Can you genuinely afford this home loan once we factor in your income and expenses?"

How lenders calculate your borrowing capacity:

• They consider your declared and benchmarked living expenses.
• Assess your existing debts (credit cards, car loans, HECS).
• Look carefully at your monthly repayments, including existing interest repayments.
• Apply a buffer to allow for potential future interest rate increases.

Addbacks—How they can help

Addbacks are expenses that don’t reflect your true borrowing power. Lenders may add these back to your income, improving your assessed borrowing capacity. Common examples include depreciation, non-recurring costs, and one-off setup expenses.

A knowledgeable broker will seek these addbacks to maximise your borrowing potential.

Clean Financials and Documentation

Clear, timely, and organised personal finance documents are crucial for self-employed borrowers.

Banks typically want to see you provide up to date:

• Business Activity Statements (BAS)
• Detailed bank statements showing clear cash flow
• Accurate Profit & Loss and Balance Sheets (your financial documents)
• Evidence of your tax position from the Australian Taxation Office

What if you have ATO debt?

Unpaid ATO debt is a red flag. However, it doesn't automatically disqualify you if you're upfront and demonstrate a manageable repayment plan with the Australian Taxation Office.

Pro tip: Ensure all your financial records are up to date. Late lodgements instantly raise lender caution.

Tips to Boost Your Borrowing Power

Being self-employed doesn’t mean you have to accept limited home loan options. Here’s how you can take control and maximise your chances of getting approved (and maybe even approved for more).

1. Seek Professional Advice Early

The smartest move you can make? Talk to your accountant and a specialist mortgage broker long before you're ready to buy.

Your accountant can help you structure your income and business finances clearly and effectively, ensuring your financial statements and tax returns tell a story lenders understand.

A good mortgage broker who specialises in self-employed loans will guide you through exactly what banks want to see, clarify any complexities in your finances, and match you to lenders who actually cater to self-employed borrowers.

By doing this early, you position your finances in the best possible light, significantly improving your chances of loan approval.

If you don't have a relationship with a good accountant, reach out to our sister company at info@causbrooks.com.au today to schedule a meeting with one of our tax experts.

2. Reduce Existing Personal and Business Debt

Lenders evaluate your existing debts closely—this directly impacts your borrowing capacity.

Reduce high-interest debt like credit cards, personal loans, or business overdrafts. Even small debts can heavily influence how lenders calculate affordability.

If possible, consolidate debts or restructure them with lower interest repayments to free up more income for your future mortgage.

Pay down debts strategically. Clearing even minor debts can significantly boost your borrowing power, as banks factor monthly repayments into their affordability calculations.

Lowering your debt not only improves your credit history, it also sends a strong signal to lenders about your overall financial responsibility.

3. Save for a Larger Deposit to Avoid Costly LMI

While saving a larger deposit can feel daunting, especially if you're investing back into your own business, it's one of the best ways to strengthen your application.

A deposit of 20% or more means you'll avoid paying Lenders Mortgage Insurance (LMI), which can add thousands to your borrowing costs.

Having a larger deposit increases the pool of lenders willing to approve your loan, potentially giving you access to better interest rates and terms.

If 20% feels unreachable, even aiming for 10–15% can help. Also, consider leveraging government-backed schemes such as the First Home Guarantee, which allows eligible buyers to buy with as little as a 5% deposit without paying LMI. Read more about these at our article Tips for First Home Buyers here.

4. Consider Alternative Documentation (Low Doc) Loans

If traditional loans don’t suit your financial situation—perhaps due to fluctuating income or fewer years of tax returns—alternative documentation or "low doc" loans could be an option.

Low doc loans allow you to get a home loan with less extensive paperwork, typically using BAS statements, bank statements, and self-declarations to verify your income.

Keep in mind these loans often come with higher interest rates due to perceived risk. They're best viewed as stepping stones toward refinancing into more competitive loans later when your income stabilises.

Always seek professional advice before considering low doc loans—while useful, they should align with your long-term financial goals.

Taking these proactive steps can turn the tables in your favour, positioning you strongly with lenders and bringing your goal of homeownership closer, even if your finances don’t fit the traditional mould.

Ready to see exactly how much you can borrow and what strategy suits your situation best? Schedule a quick chat with our specialist mortgage brokers today.

Case Study: Meet Sarah—The Designer Who Made It Work

Sarah, 33, operates her own business, a successful branding agency in Sydney, structured as a company and discretionary trust. Her fluctuating income initially made it tough to get approved for a home loan.

By engaging professional support from both her accountant and a specialised mortgage broker, Sarah clearly demonstrated her genuine earning capacity, presented clean financial statements, and successfully applied strategic addbacks.

She ultimately secured a loan with favourable terms and minimal hassle, despite her initially low taxable income figures.

At Causbrooks Finance, we specialise in self-employed loans. Whether you're looking to enter the property market, refinance, or restructure your debt, we're here to help you navigate the complexities of self-employed lending, taking into account your own particular circumstances.