Tax time mortgage warning for millions as dad exposes $500,000 issue: ‘Harder’
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Tax time mortgage warning for millions as dad exposes $500,000 issue: ‘Harder’
Self-employed Australians are facing tougher challenges when applying for home loans. Aussies are being warned that getting this year’s tax return right could mean the difference between getting a mortgage approved or not. Frank Farrelly is self-employed and has been running his dental practice in Sydney’s Darlinghurst for the past eight years. The 43-year-old dad of two said he and his husband were recently knocked back for a home loan by their broker. The couple are hoping to upgrade from their one-and-a-half bed terrace in Darlinghurst to a larger terrace to give their two young kids more space.
Self-employed Australians are facing tougher challenges when applying for home loans, with the current economic conditions adding further pressure. Aussies are being warned that getting this year’s tax return right could mean the difference between getting a mortgage approved or not.
Frank Farrelly is self-employed and has been running his dental practice in Sydney’s Darlinghurst for the past eight years. The 43-year-old dad of two told Yahoo Finance he and his husband were looking to upgrade to a bigger house but were recently knocked back for a home loan by their broker.
“As someone who is self-employed and runs their business, it is harder to get a mortgage and it’s based on income over a much longer period,” Farrelly, who is originally from Ireland, said.
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“Staff wages have gone up, costs of everything else has gone up but it’s also everyone feeling the pinch so it’s hard for us to justify price rises.
“At the same time, we’re getting a lower number of people through the door. Business conditions are poor, which I think is across the economy in general.”
The couple are hoping to upgrade from their one-and-a-half bed terrace in Darlinghurst to a larger terrace to give their two young kids, aged 6 and 8, more space.
Despite being a double-income household, with Farrelly’s husband working as a lawyer, and having a decent amount in savings, the couple were unable to get approval for a home loan of the size they wanted.
Farrelly said the maximum they could get approval for was $3 million when they had been hoping for up to $3.5 million, leaving a $500,000 gap.
Farrelly said their broker advised them that they are seen as “riskier” applicants due to changing business conditions.
Self-employed Aussies seen as riskier
Recent findings from Great Southern Bank found 40 per cent of people thought it was harder to get a home loan as a small business owner.
The main hurdles included instability of income, stringent lending criteria, being seen as too high risk, and the complex process of gathering necessary documentation.
Marina Michael, a mortgage broker specialising in helping self-employed clients, told Yahoo Finance every bank had a different appetite for self-employed borrowers.
Mortgage broker Marina Michael says banks consider self-employed borrowers are more risky. (Source: ELending Finance/Getty) · Source: ELending Finance/Getty
“Traditionally, especially before Covid, every lender was looking at a minimum of two years of financials, including the tax returns, the company tax returns and your individuals, and your notice of assessment,” she said.