How lenders read self-employed income
Most banks want two years of trading history and average the last two years of income, often using the lower year where the trend is down. Add-backs such as depreciation and one-off expenses can sometimes be applied, which lifts the assessable figure.
If you trade through a company, lenders look at shareholder salary, drawings and retained profits together, rather than only what you pay yourself.
Contractors are a separate case
Long-term contractors on a single ongoing contract are treated more like PAYE employees by several lenders, particularly with a track record in the same field and a contract with time left to run.
That distinction matters: the same income can be assessed conservatively as business income at one bank and close to full value as contract income at another.
What you will need
Have these ready before you approach a lender.
- Two years of financial statements prepared by your accountant.
- Two years of tax returns and IRD income summaries.
- GST returns for recent periods where you are registered.
- Six months of business and personal bank statements.
- Current contracts or a pipeline summary where relevant.
- An accountant's letter confirming your position, if income has grown.
What strengthens an application
Minimising taxable income is good tax practice and poor mortgage practice. In the two years before you buy, the two need to be balanced deliberately.
- Keep business and personal spending clearly separated.
- Clear or reduce business overdrafts and vehicle finance where you can.
- File tax returns on time; late filings limit lender options immediately.
- Build a visible savings pattern in a personal account.
- Talk to your accountant about how the next return will read to a lender.
Getting a realistic estimate first
An estimate based on self-employed income should be treated as a starting range, since assessment differs so much between lenders. Our calculator applies a conservative discount to self-employed and contracting income; an adviser can then identify which lender's policy reads your situation most favourably.
Common questions
How long do I need to be self-employed to get a mortgage in NZ?
Two years of trading is the usual requirement. Some lenders will consider one year where you have a strong history in the same industry and clear financials, generally with a larger deposit.
Do banks use my business turnover or my profit?
Net profit, plus shareholder salary and permitted add-backs. Turnover on its own is not assessed as income.
Can I get a home loan with one year of financials?
Sometimes, usually with a non-bank lender or under a specific bank policy, and usually at a higher rate or with a larger deposit requirement.
Is it harder to borrow as a contractor?
Not necessarily. A contractor with an established history and a current contract is often assessed close to a salaried applicant by lenders whose policy recognises contract income.