Understanding Home Loans for Self-Employed Individuals

Where the “Two Year Rule” Comes From

Traditionally, lenders have preferred to see two full financial years for self-employed applicants. From a bank’s perspective, this helps them assess income consistency and business stability. Because of this, the two-year rule became the default advice given by banks, call centres, and even some brokers. The problem is that lending policy has evolved, but the advice often hasn’t.

When 12 Months of Financials Can Work

There are many scenarios where a lender will accept only one year of financials, including:

• You are a sole trader, partnership, or company director.

• Your most recent year shows stable or increasing income.

• Your business has been trading for at least 12 months.

• Your industry is considered stable.

• You have a clean credit history.

• Your overall application is strong.

  
  

Some lenders will also accept:

• An accountant’s letter confirming income and sustainability.

• Business Activity Statements to support recent performance.

• Year-to-date figures to demonstrate ongoing income.

  
  

This is where broker experience matters. Not all lenders assess self-employed income the same way. The right lender for a PAYG employee is often not the right lender for a business owner.

Why This Matters for Self-Employed Borrowers

Believing the two-year rule without questioning it can have real consequences for self-employed buyers.

For many business owners, income is strongest in the early years, especially after leaving PAYG employment, increasing prices, or securing new contracts. Waiting an extra year can sometimes reduce borrowing capacity rather than improve it, particularly if deductions increase or income normalises.

This misconception is especially common among homeowners who have recently become business owners. Many assume that once they leave PAYG employment, they must wait two full years before they can access their home equity. In reality, that’s often not the case.

Depending on how the business is structured and how income is evidenced, some lenders will still consider applications with 12 months of self-employed financials, even when the purpose is to refinance, renovate, or access equity for another purchase. This misunderstanding often leads homeowners to delay plans unnecessarily, whether that’s upgrading their home, investing, or using equity to support business growth. In some cases, the equity is there and the servicing is there, but the application is never explored because of outdated advice.

The Role of Your Accountant

This is also where involving your accountant early can make a big difference. Introducing your accountant to your broker helps remove confusion. It ensures everyone is working from the same information and avoids mixed messages around income, deductions, and structure. When both professionals are aligned, it becomes much easier to present your numbers accurately and position your application correctly from the start.

It also affects tax and structuring decisions. Without proper guidance, some borrowers unintentionally reduce their assess able income by aggressively minimising tax, only to discover later that it limits what they can borrow.

Timing is Everything

Then there’s the timing element. Property markets, interest rates, and personal circumstances don’t stand still. Assuming you must wait two full years can mean missing opportunities that may not come around again in the same way.

Most importantly, the advice you receive early can shape the outcome significantly. Knowing what lenders actually look for allows you to plan properly, structure your income sensibly, and move forward with confidence rather than uncertainty.

Making Informed Decisions

The right advice doesn’t just help you get a loan. It helps you make informed decisions about when to apply, how to present your numbers, and whether waiting truly puts you in a better position.

The Bottom Line

The two-year rule is not a myth, but it’s not a hard rule either. Many self-employed borrowers can qualify for a home loan with just 12 months of financials, provided the application is structured correctly and assessed by the right lender.

If you’re self-employed and wondering where you stand, a quick conversation can often save you months, or even years, of waiting.

You find the business, I will find the loan.