If you happen to be a salary earner, proving your income is relatively easy. As long as your Employer issues decent quality Payslips, you can provide the 3 most recent slips and your income is locked in. Here’s a brief video about Payslips.
But if you are self-employed, income is a little harder to prove. Income can fluctuate from month to month and isn’t a good measure of your profit.
The traditional method is to provide a set of Financials for the business. This shows the business’ income and expenses. Whatever is left over is your profit and can be used towards your mortgage. There may be some other adjustments that can be made but your Adviser will calculate that for you.
At the time of writing, it’s almost May 2018 (where did the year go?). You’re not generally required to submit your April 2017 – March 2018 Financials to the IRD until March 2019. In fact, the financial year has only just finished so there’s no hurry yet.
If you are looking for a mortgage at this time of year, the bank will consider that using the previous year (April 2016 – March 2017) financials as appropriate. But the income from those accounts is coming up to a year old so by the end of August 2018 they are going to want to start seeing the latest year. This is where self-employed people get caught out. You aren’t required to have your financials complete until March 2019 (through an appropriate Accountant) but the bank wants to see them from August / September 2018.
If you are considering getting a mortgage between September and March, you will need to have your most recent set of Accounts completed. You don’t have to submit them to the IRD but they must be signed off by your Accountant as accurate. It would pay to get all the documents to your Accountant as soon as possible to avoid a last minute rush. As a bonus, you will be providing your Accountant with documentation much earlier than most of their clients. They will love you for that!
Think you’ve got your Accounts sorted? Here’s a blog on deposit for your first home.
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