Buying a home is a monumental step, especially when you’re self-employed. The process comes with unique challenges, particularly when it comes to securing financing. Lenders often have strict criteria for self-employed individuals, and understanding how to maximise your financial profile can be the key to unlocking your borrowing potential.
Sarah and Mark approached Zenith to help them finance their dream home. As self-employed individuals, they had great earnings, but the complexity of their financial situation meant they needed expert guidance. This case study outlines how we helped Sarah and Mark maximize their usable income for a more favorable serviceability assessment, ultimately enabling them to secure the finance they needed.
The Challenge
Sarah and Mark, both in their early thirties, had recently built up successful businesses—Sarah owned a digital marketing agency, and Mark ran a boutique architecture firm. They were earning strong incomes but had been facing challenges in getting approved for a home loan due to being self-employed. The key issues were:
- While their businesses were profitable, they were experiencing some big variances in their incomes, which lenders typically don’t prefer as they like stability and consistency of income
- Their taxable income, after deductions, was lower than their gross earnings, which negatively impacted their borrowing capacity
- Despite a solid deposit of $300,000, they were concerned that their self-employed status would limit the amount they could borrow for their dream home
Our Approach
At Zenith, we specialise in working with self-employed clients and understand the unique hurdles they face when applying for home loans. Our first step in working with Sarah and Mark was to have an in-depth discussion about their financial situation:
- We reviewed their business financials, including profit and loss statements, tax returns, and business bank statements.
- We discussed their future goals for the property, as well as their preferred location and desired home features.
- We looked at their overall budget, current liabilities, and the amount they were able to allocate toward a deposit and home loan repayments.
Once we had a full understanding of their situation, we began working on strategies to maximise their usable income for the bank’s serviceability assessments, which would significantly impact their borrowing capacity.
Maximizing Borrowing Capacity
Here’s how we helped Sarah and Mark maximise their usable income:
- Optimizing Business Deductions
We worked closely with Sarah and Mark’s accountants to review their business deductions and identify areas where adjustments were made. By understanding their deductible expenses, we could then select the most suitable lender to fully utilise these to maximise useable income. - Using Add-backs to Increase Serviceability
We identified additional “add-backs” that could be included in their serviceability calculation. For example, business-related expenses like depreciation and interest on business loans, which are non-cash expenses, could be added back to their income, significantly improving their borrowing capacity. - Leveraging Rental Income
Sarah and Mark had a small commercial property that they rented out. We worked with the bank to ensure that the rental income was able to be used in their serviceability calculations, which boosted their overall income. - Ensuring Accurate Income Documentation
We worked with their accountant to provide a more detailed explanation of how their businesses generated income and the sustainability of their earnings, making it easier for the lender to understand their financial position. - Navigating Lender Requirements
Not all lenders treat self-employed applicants the same way. We guided Sarah and Mark to lenders that specialise in working with self-employed individuals, which allowed us to take advantage of more flexible serviceability criteria and better lending terms.
The Process
With the improved serviceability calculations, they were now able to borrow more than they originally thought, putting them in a strong position to purchase their dream home.
Throughout the process, we provided Sarah and Mark with constant updates and support:
- We obtained pre-approval, so they could begin house-hunting with confidence, knowing their finances were in order.
- As they viewed properties, we provided detailed market data and property comparisons to ensure they understood the true value of each home they considered.
- When they found the perfect property, we coordinated with the lender to ensure that the financing was finalised smoothly and that they were ready for settlement.
The Outcome
With the tailored strategy we implemented, Sarah and Mark were able to secure a loan that was well above what they originally thought possible. By maximising their usable income for the bank’s serviceability assessment, we helped them increase their borrowing capacity, allowing them to buy their dream home in a highly sought-after suburb with great local schools.
After successfully navigating the loan approval process, Sarah and Mark moved into their new home, grateful for the expertise and support provided by Zenith. Not only were they able to purchase a property that matched their vision, but they were also equipped with a clear financial strategy that set them up for long-term success.
This study case highlights the importance of expert financial advice when you’re self-employed and looking to secure a home loan. At Zenith, we specialise in helping clients maximise their borrowing capacity, even in complex financial situations. If you’re self-employed and looking to buy a home or refinance for better rates, get in touch with us today for expert advice tailored to your unique needs.
