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Australia’s largest lender has rolled out a new income verification method that assesses eligible self-employed mortgagors using only their most recent financial year information.
The Commonwealth Bank of Australia (CBA) has moved to broaden its self-employed policy in a bid to help more self-employed individuals secure a property.
Brokers writing loans to the major bank may now use a streamlined income verification method for certain customers using only their most recent financial year information (rather than two years).
To be eligible, customers must have been trading for at least two years, have a loan-to-value ratio of 80 per cent or less, and have a maximum of $3 million in total CommBank home lending. They must also have a business transaction account that has been used at least once (or open one and make at least one deposit).
Servicing will be achieved using 90 per cent of the eligible self-employed income, according to the major bank.
CBA said that the change applies to personal applicants only (and excludes non-personal borrowers and guarantor loans).
Speaking to The Adviser about the shift, a CBA spokesperson said: “At CommBank, we’re committed to helping Australians realise their property ambitions. To this end, we recently broadened our lending policy so that eligible self-employed home loan customers can have their home loan assessed using their most recent financial year information.
“This will allow us to help even more self-employed home buyers achieve their property ownership goals.
“We know a lot of self-employed customers choose to use a broker who understand all too well the challenges that business owners face. And we are committed to helping our broker partners provide their customers with an exceptional home lending experience.”
Brokers can still utilise the standard assessment process for their self-employed customers should that be preferred.
The change comes as more lenders move to compete in the self-employed lending space.
While non-bank lenders such as Pepper Money, RedZed, and Resimac have been focusing on self-employed lending growth for years, more banks have been expanding into this arena, too.
For example, several non-major banks such as ING and Bankwest have been focusing on self-employed lending, while Great Southern Bank recently changed its policy to be more flexible for self-employed applicants, increasing rental income recognition to 90 per cent, too.
The moves come amid a growing acknowledgement of the challenges that self-employed borrowers face when trying to access home loans and amid growing competition in the mortgages space.
[Related: A sense of self (employed)]
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