Written and professionally reviewed by the Ailon Financing Solutions team
Why independent is another story
An employee brings a slip. The bank looks at one number and knows how much comes in each month.
A freelancer brings a story: turnover, expenses, profit, a good year versus a weak year, a big client who left. The bank needs to turn this story into a story, and along the way it is being careful.
This caution is not discrimination. is risk pricing. The income of a self-employed person varies more, so the bank requires more evidence. Those who understand this in advance arrive prepared and receive the same conditions as a tenant.
What is the bank really looking at?
Reported profit, not turnover. This is the point that most people miss. The bank examines the taxable income after recognized expenses, as it appears in the assessment.
average of two years. Most banks take an average of the last two years. A strong year after a weak year averages down.
trend. Income that increases from year to year is called differently than income that decreases, even if the average is the same. A downward trend will lead to questions and sometimes a calculation according to the low year.
The stability of the industry and customers. A business that relies on one customer is seen as more risky than a business with a wide spread of customers.
the conduct of the account. both private and business. Permanent minus, returns of standing instructions, permanent use of frames. Everything is called.
The documents you will need
Beyond the usual list:
- Tax assessments for the last two years, sometimes three
- Updated profit and loss statement for the current year
- Certification of an accountant or tax consultant on the income
- Advance reports and VAT
- Business and personal account statements, six to twelve months
- Confirmation of the absence of debts to the authorities
- For a limited company: balance sheets, a printout of the register of companies and holdings
A tip that saves weeks: Prepare everything before the first serving. A freelancer's file that arrives partially enters a circle of completion that can stretch the process for a month or more.
The conflict between tax and mortgage
This is the most important point in this guide.
Most self-employed people plan the year to pay less tax. It makes sense. But low assessed income also means a lower mortgage.
A self-employed person who reduced his reported income by 60,000 shekels per year saved tax, but could lose hundreds of thousands of shekels in financing capacity.
Those who plan to buy an apartment in the next two years must weigh it in advance, along with the accountant. Sometimes it pays to pay a little more tax in one year to get the apartment. This is a business decision that should be made with open eyes, not discovered in retrospect.
What do you do when the income on paper is low?
be prepared a year in advance. This is the best way. An orderly report one year before the application changes the picture.
Add another borrower. An employed spouse, or a parent. The joint income is considered together.
increase equity. The lower the required financing, the more flexible the bank.
display assets. Another property, significant savings, investment portfolio. They are not counted as income but improve the overall picture.
Contact the correct bank. It is not negligible. Banks have different policies towards the self-employed and different occupations. A business rejected in one bank can be accepted in another, with exactly the same data.
The common mistakes
come up with turnover instead of profit. "I make a million a year" means nothing to the bank. What speaks is the bottom line in the mole.
Mix business and personal account. One account where everything is mixed makes it difficult for the bank to understand the picture, and what is not understood is seen as a risk.
withdraw all profit. A business with nothing left seems fragile.
Submit to one bank and be satisfied with the answer. A self-employed person who has been rejected by one bank is not necessarily unfit for a mortgage. Sometimes he just went to the wrong bank for him.
The bright side no one is telling
An established independent can accept terms are good landlord.
High income, dispersion of clients, long service and organized financial management create a very strong profile. A bank that sees a stable business with a decade of activity will compete with you.
The difference between a self-employed person who is rejected and a self-employed person who receives excellent conditions is usually not the level of income. is the way the bag is presented.
The bottom line
The self-employed don't have to work harder to get a mortgage. He needs to prepare better.
A year of organized reporting, a separate business account, documents prepared in advance and contacting a bank that suits your industry. Four things, and all of them are under your control.
Prepare a file that can be checked
Compile documents with The list of documents for the mortgage and completed Mortgage readiness check. Document requirements and how income is calculated may vary between banks and according to the characteristics of the business.
