According to new research, Australia’s growing gig economy and increase in the number of small businesses is driving demand for a range of specialist self-employed home loans.
Non-bank lender Homeloans Ltd has seen an increase of more than 20% for alternative document solutions in the first half of this financial year.
Almost 17% of Australia’s workforce is now self-employed and according to recent figures from the ABS, there are now 2.24million actively trading businesses, with annual growth of 3.1% in 2016-17 primarily being driven by non-employing businesses or independent contractors.
Homeloans’ general manager, third party distribution, Daniel Carde, said that the self-employed sector can struggle to find home loan products, but Homeloans sees a strong opportunity within the market.
He added, “A common trend we’re seeing is career professionals making the switch from employment to self-employment within their same field of expertise, often driven by a desire for more flexible hours and a better work life balance.
“For too long, self-employed people have struggled to secure home loan finance. And this is largely because they’re unable to supply the traditional financial statements required by most lenders.
“We take a more flexible approach and base our lending assessments on documents such as bank statements, business activity statements or accountant letters, which are extremely current. What we’re finding is these documents actually provide a more up-to-date and detailed picture of a borrower’s financial situation, unlike tax returns which can be almost a year or more out of date.”
Carde said that taking a more flexible approach does not mean lending assessment criteria are less strict.
He said, “There’s no difference between a full documentation loan and an alternative documentation loan when it comes to the lending assessment. All income verification, irrespective of what has been provided, documents undergo the same levels of scrutiny and due diligence. And if in doubt, we always seek further information.”
One common myth Carde is keen to dispel is that interest rates are often higher for self-employed home loans.
He added, “The interest rates vary depending on the LVR, the type of income verification provided and whether the borrower has any credit impairment or not. But for a self-employed borrower who has full financial statements available, the interest rate is the same as a PAYG borrower.
“In fact, for those borrowers who are looking to provide alternative forms of income verification, we have rates starting as low as 4.54% under our Accelerate product range.”
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