Money Saving Tips for Business Owners with a Mortgage
Securing a home loan as a business owner can be notoriously difficult. Without stable and consistent payslips, it can be hard for business owners to convince banks to qualify them for a home loan. While it might be more difficult for business owners, securing a home loan is not impossible. Here’s what you can do to make it easier.
Getting a Home Loan
Know your business numbers
As a business owner, you will know that your income can fluctuate from month to month. This is one of the main reasons banks can be reluctant in giving home loans to business owners. Therefore, it’s important you know your numbers and can present adequate proof of your income.
Lenders will want to see how much you earn, your capacity to deal with debt and the frequency that you make deposits to your savings account. Obviously the more successful your business is, the more willing a bank will be to pay the loan.
To make the process as smooth as possible it’s important to include up to date and accurate balance sheets and profit and loss statements.
Online home loan marketplaces, like HashChing, allow borrowers to find pre-negotiated home loans and even calculate their borrowing capacity. However, whether you apply for a home loan online or you choose to meet a lender, you will need to present a variety of documents. These include:
Like most financial ventures, you need to supply Identification. This can be your passport, driver’s license or non-photographic forms like birth certificates and utility bills.
- Income statements:
You will need to show both your business and personal tax returns and statements and any other finance statements.
- Financial information:
Your financial information includes bank account statements, credit loans and debts as well as any existing investments and assets.
- Other Income:
It’s also important to include any other incomes. This could be rental incomes and government payments.
Extra informationcan help
As a business owner, your most recent income statements might not be a good representation of the current position of your business. This means you will have to provide extra information to create a clear picture of your income.
Make sure your lender and/or accountant understands your payments and income. If a big chunk of your recent income was spent on updating software for your business, make sure it’s clear that your lender knows this was a one-off payment.
Build good credit
Having a good credit history is essential for buying a house. Your credit history shows your ability to manage your accounts and meet existing financial commitments. Lenders will always check your credit history as part of the application process so it’s suggested that before you apply, you spend some time building up a good credit score.
Make a bigger down payment
Making a bigger down payment can be a good strategy, especially if your credit history isn’t in great shape. Putting down a bigger down payment can give you a better interest rate and lower the loan amount. This means you can pay off the loan over a shorter term, saving on accrued interest, or you can make smaller monthly payments. Either option can be helpful for business owners.
Refinance your mortgage
If you already have a mortgage, or once you get one, you can save money by refinancing your home loan. Refinancing your home loan is a way to find a lower interest rate or lower repayments. Finding a mortgage with a lower interest rate can help business owners save money.
This might only be a few hundred dollars per repayment, but over the life of the loan it can mean saving thousands. This is a great way for a business owner to free up some cash to put back towards the business or their family.
As a business owner, it can be more difficult to secure a home loan than employed counterparts. However, with accurate and up to date documentation and a good credit score, it is definitely possible. If possible, making a bigger down payment, or refinancing an existing loan can be great ways for business owners to save money on their mortgage.