Policy changes for self-employed borrowers

Effective 29 April, the changes include a simplified income verification process for Prime Alt Doc applications. The required documents have been reduced to just one of the following: an Accountant’s Letter, Business Activity Statements (BAS), or Business Bank Statements.

Pepper Money has also increased the maximum loan amounts across Prime Alt Doc and Full Doc options to enhance borrowing capacity. Clients can now access up to 80% Loan-to-Value Ratio (LVR) for loans up to $1.5 million on the Prime Alt Doc option (category 1 and 2 securities). Additionally, clients can now access 80% LVR with a maximum loan amount of $2 million on the Prime Full Doc option.

In a bid to support self-employed clients in owning their homes, Pepper Money has also increased the maximum LVR to 85% for the Prime Alt Doc option, with loan limits based on security locations.

Recognising the significant demand for vacant land, Pepper now offers it on Near Prime Clear Alt Doc and Near Prime Alt Doc loan options. The maximum LVR has also been increased to 80% for Category 1 and 2 locations.

Furthermore, the servicing calculator has been updated to simplify income calculations for self-employed applicants, including worksheets for their income.

Pepper Money’s General Manager Mortgages and Commercial Barry Saoud said: “For more than two decades, we’ve been committed to supporting the success of freelancers, sole traders, entrepreneurs, and small business owners.

Our latest policy changes are a direct response to changing needs of self-employed borrowers, the current economic conditions, and our desire to support brokers in expanding their client base.

Saoud says the number of self-employed individuals is on the rise, thanks to the gig economy and the appeal of entrepreneurial ventures. This growing segment presents an expanding opportunity for brokers to extend their business.

“Self-employed borrowers bring a rich diversity to a broker’s portfolio. They hail from a wide array of industries and professions, each with unique financial situations. This diversity not only enriches the broker's experience but it expands their networks and opportunities for new business referrals,” he said.

“We know that self-employed clients are a little different when it comes to demonstrating income, and with these changes we’ve introduced, brokers can assist more clients by providing a single verification of income across all of our loan options.”

“Pepper Money is one of the only lenders in market to offer the most diverse range of income verification options,” he said. Self-employed clients can verify their income with Pepper Money simply using just one of the following documents: most recent tax returns, financial statements executed by an accountant or tax agent, or alternative documentation (Alt Doc) verification, such as an accountant letter, six months BAS, or six months Business Bank Statements (BBS).

“Mainstream lenders often don’t offer these alternative ways of verifying income at a prime bank rate,” Saoud noted.

Last year, over 40% of Pepper Money’s customers were self-employed borrowers and around 1 in 3 applications used an Alt Doc solution. “Many of our self-employed customers have a newly established or growing business or are seeking to release equity or improve cash flow,” he said.

Dumith Danister Kankanamge from Prime Choice based in Essendon VIC has extensive experience in commercial and residential lending for SME clients, particularly in the northwest regions, where his client base spans tradies, contractors, sole traders and more. He estimates over 90% of his business is generated by business referrals and word of mouth.

“As a broker in business for over 14 years, I know first-hand about the power of entrepreneurship – and it’s my goal to help my clients secure the financing they need to grow their businesses and venture.”

“They each come with unique circumstances and needs – it’s never a one size fits all solution. I think the science behind helping self-employed clients is all in understanding their mindset and their unique and often complex circumstances. As brokers, we’re here to simplify the process and unlock opportunities for our clients,” he said.

Dumith praised Pepper Money for their cash out options, LVR thresholds, land policies, processes, and their Business Development Managers (BDMs), saying, “Pepper Money delivers on what they promise.”

“The expansion of the maximum loan amount is a significant step forward in addressing the servicing challenges we’ve been facing in the current market,” he said.

As the Australian Taxation Office (ATO) cracks down on collecting approximately 4 billion dollars from 40,000 businesses, Saoud says it’s important to find ways to support businesses feeling the pressure and enabling brokers to do that effectively.

“We understand the pivotal role that brokers play in connecting borrowers with the right financial solutions. Therefore, we are constantly refining our processes and systems to ensure brokers can access our services with ease and efficiency. In essence, our recent changes to the Prime Alt Doc product are more than just policy adjustments. They represent our ongoing commitment to inclusivity, simplicity, and service excellence for brokers.

Our diverse range of verification options, coupled with our flexible service, sets us apart in the market. We understand the unique needs of self-employed borrowers and are committed to providing tailored solutions

With over 23 years of experience, Pepper Money has been recognised as delivering the ‘Best Home Loans for Self-Employed Buyers’ by WeMoney. Pepper Money prides itself on its flexibility to make lending for all kinds of real-life situations possible, providing solutions across all lending categories, including those facing the toughest challenges.