Self employed for 4 months, how long before I can obtain finance?

[bombers86]

Hi everyone!

Just had a question regarding self employment and getting finance. I've been self employed now for about 4 months. I currently own 1 IP that settled in December 09. Value: $380K, Loan: 348K. Negatively geared. Myself and partner 50/50

I also have a block of land in a regional area. Value of $70K approx. I own this outright. I am looking to build on it, hopefully building a 4 bed, 2 bath for max $150K.. (hopefully!)
I currently have about 15K in savings (so 10% deposit).. But I wasn't sure whether the bank would use the equity in the land to cover the costs of the deposit for financing the construction side of it... I don't have any other liabilities (no credit cards, loans other than the mortgage for our IP)

I've been to a couple of brokers and both have said there is no way I can get finance unless I've been self employed for at least 1-2yrs... So that was pretty disheartening. But they also suggested low doc loans, but I'd have to come up with at least a 40% deposit. One broker told me it was unlikely the bank would use the land equity as my deposit because it's a regional area.. But the other broker said there would be lenders that would consider it??

- Has anyone been able to obtain finance early on when they've become self employed, if so, with who?
- Also, has anyone been in a situation where they've owned the land outright and used it as equity for a deposit to build on it. Or do you think I'd have to come up with a 40% deposit myself for a low-doc loan?

Thanks to anyone with some feedback!!
Cheers

 

[Rolf Latham]

Hi

Lenders really want to see 2 full years of financials for a buisness..

The reason is that most businesses fail within the first 2 years, even many of those that have survived for 6 mths.

If the loan you are looking for also needs mortgage insurance ( less than 20 % deposit on full doc) the mortgage insurers ofetn want more than 2 years coverage.

The equity in the land is useable instead of deposit usually and you may be able to get a 60 % low doc away with 6 mths figures

ta
rolf



ta
rolf

 

[bombers86]

Thanks Rolf. I did know before going into this job that my finance options would deteriorate big time, so I basically expected that. I guess I'm just seeing if anyone has come across some lenders who are more flexible than others...
It's good to know that lenders will look at my block of land as part of the deposit (and also not having to pay LMI!)
Thanks again

 

[Qlds007]

Although under NCCP whilst at a 60% lend it is stated income you will still need to show BAS and Bank Statements to comply with the "responsible" part of the legislation.

 

[Rolf Latham]

Unless of course someone applies direct to an ADI..................

"Nudge nudge wink wink say no more" approach till Jan 1


ta
rolf

 

[Pa1nter]

Hi

Lenders really want to see 2 full years of financials for a buisness..

I have been in your situation
Then they will take the lowest income for those two years or possibly the average over three years.

I personally would try and use the time you have to wait to get debt free (and that means credit cards) possibly use your cash to get a building on that land and get it operating as a small rental.(Even a weekender shed)start building it up to be more than just vacant land. Fences,water,power,.
Earn as much as you can in the meantime,you need two good years ,don't slacken off,it will happen if you want it hard enough

 

[Qlds007]

Yes sorry Rolf silly me forgetting there is a double standard in the industry.

 

[RumpledElf]

- Also, has anyone been in a situation where they've owned the land outright and used it as equity for a deposit to build on it. Or do you think I'd have to come up with a 40% deposit myself for a low-doc loan?

Our broker says we can use our land (owned outright) as a deposit to build. Unfortunately it is only 35% of the total land+build cost. His suggestion was to get the difference to take it to 40% from equity in one of our other houses, which are both around 30% LVR so we have plenty of room to move to bring them up to 60%. We're also saving up as a backup plan since it is possible we can get that extra 5% from pure savings without having to borrow more. Or someone might buy my old house, in which case everything is moot.

However, we've had our ABN/GST rego for about 4 years, its just not consistent enough to go above 60% on a lodoc.