Freelancers and small business-owners: tips on getting a home loan

MortgageOwning your own business and freelancing can be great sources of income. But it can also be detrimental if you are looking to get a home loan to purchase a house. Because you don’t have a steady stream of income or may not receive a payslip, banks may employ stricter lending criteria against you. But all is not lost.

As a freelancer, you will need to ensure you tick all the right boxes, have all your tax returns and paperwork in order and are fully aware of your financial situation.

The first thing you need to make sure of is that you have good credit with all South African lending institutions. Because lending criteria may be more stringent for you as a freelancer or small business-owner, you may need a higher credit score than full-time employees. You can use any number of credit checking agencies (such as Experian) to assess your credit score and get a free credit report. These checks can also help you identify any inaccuracies in what credit-checkers may see, and can also help you determine whether you have been a victim of Identity theft.

It is important to be certain that your tax returns reflect your actual earnings. Reducing your income by claiming business expenses can be helpful in the short term, but banks will check your tax returns. If your income is reflected as a lower amount than you actually earn, you may only qualify for a small (or smaller) home loan. They will also require you to give proof of income over the past few years.

Be sure you have enough money in savings to cover at least few months of your bond repayments, in case you encounter a dry spell at work. This will not only help protect you, but will give lenders more security against default on payments. Additionally, lenders may require you to prove you can make payments in the event of you not earning money over a period of time.

You should also make certain you don’t have a large amount of debt in your name. Your debt-to-income ratio should be relatively low. You can use one of our bond calculators to determine what you can afford on your bond repayments, factoring in your debts as an expense.

If you have any capital you can re-finance, or put up as surety against a home loan, these could go a long way towards helping you secure a home loan. Speaking to a mortgage consultant can help you determine what assets can be used as surety. If you have a home already, you may be able to refinance your home for a cash deposit, thus reducing your bond repayments and the amount you need to borrow.

If you’re a freelancer and are looking to get a mortgage, why not contact us today and we can discuss your options, with no obligations.


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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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