Short answer: in our worked example, a self-employed gardener making about $148,000 a year in profit could borrow around $691,000 on his own. Add a partner earning $76,000 and that rises to around $1.23 million. With the 5% Deposit Scheme, that is enough for a two-bed, two-bath unit in Cronulla at about $1.21 million, with roughly $60,500 down and no lenders mortgage insurance.
To make the numbers more fun, we ran them for Samwise Gamgee. Same gardener, Sydney prices. The Shire in question is the Sutherland Shire.
The borrower: a self-employed gardener
Sam runs Gamgee and Son, the gardening business his dad ran for forty years before him. Tolkien never told us how many clients Sam had, so we used the Hobbiton film set: 44 hobbit holes, each paying $400 a month.
44 clients x $400 a month = $211,200 a year in turnover
Less about 30% for tools, fuel and running costs
Profit: approximately $148,000 a year
These are our estimates for illustration, not real business figures.
What lenders want from self-employed borrowers
Most lenders want two years of business and personal tax returns, plus the financials behind them. A long, steady track record helps, because lenders assess what the business has reliably earned, not what it might earn next year. Some lenders will look at one year of financials or alternative documents, usually with tighter conditions, so it pays to know which lenders fit before you apply.
How much can he borrow on his own?
About $691,000. That figure is after tax, typical living costs and the serviceability buffer every lender has to apply. In the Sutherland Shire, that points to a one-bedroom unit.
How much can a couple borrow together?
Enter Rosie, bar manager at the Green Dragon, on about $76,000 (around the Sydney average for the role). Together, Sam and Rosie could borrow about $1.23 million.
Why does her income add so much? Lenders have already counted most of the household's living costs against Sam's income, so a large share of the second income goes straight toward loan repayments.
The deposit: 5% with no LMI
As first home buyers, Sam and Rosie could use the 5% Deposit Scheme. On a $1.21 million unit, that means:
Deposit: about $60,500
Loan: about $1,149,500
No lenders mortgage insurance
Plus stamp duty and purchase costs on top
The scheme is subject to eligibility and property price caps.
What it buys
A two-bed, two-bath unit in Cronulla with parking, around 110 square metres, at about $1.21 million. A gardener and a bar manager, on the beach.
The takeaways
If you are self-employed, have two years of financials ready.
A second income can lift borrowing power by much more than you might expect.
The 5% Deposit Scheme can cut the deposit you need and remove LMI.
Every lender assesses differently, so your own number could be higher or lower.
FAQs
Can I get a home loan if I am self-employed?
Yes. Most lenders want two years of tax returns and financials, and some accept one year or alternative documents. A broker can match you to lenders whose policy fits how your business is set up.
How much can I borrow on a $150,000 self-employed income?
In our example, about $148,000 of profit supported a loan of around $691,000 for a single borrower with no debts. Your figure depends on your expenses, debts, dependants and the lender's policy.
Does a partner's income really increase borrowing power that much?
Often, yes. Living costs for a couple are not double those of a single person, so much of the second income can go toward repayments.
Can self-employed people use the 5% Deposit Scheme?
Yes, if you meet the scheme's eligibility rules. Being self-employed does not rule you out, but you still need to meet the lender's normal credit criteria.
What could you borrow?
Everyone needs a Sam. If you do not have one, that is where we come in. Book a free chat with Echidna Equity and we will work out your number across the lenders on our panel.
Borrowing figures are estimates for illustration only, assessed at a 9.44% p.a. assessment rate (an indicative variable rate plus the 3% APRA serviceability buffer), 30 years, principal and interest, with lender living-cost benchmarks. Sam's business figures are our estimates. This is general information only and does not take into account your objectives, financial situation or needs. Subject to eligibility and lender credit criteria. Fees and charges apply. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.