Timing is Key: Mortgage Tips for Business Owners
If you're self-employed and keen to apply for a home loan, timing is everything. The performance of your business from one financial year to the next can have a big impact on your borrowing power – and strategically choosing the right time to apply can make all the difference!
Before we get into it, a quick reminder: New Zealand banks typically require two full years of financial history to assess your income, and the financial year ends on 31 March.
HOW THE FINANCIAL YEAR IMPACTS LENDING
The economic environment over the last 12 months has been challenging for many businesses. If your 2024 financial year accounts (ending 31 March 2024) are likely to show better revenue than your 2025 financial year, it's wise to apply for a mortgage before 31 March 2025.
Why? Because after this date, lenders will be requesting updated accounts - and if your revenue has dropped, the amount you're approved to borrow will drop, too.
On the other hand, if your 2025 financial year revenue is stronger than the 2024 financial year, it may actually be smarter to wait until after 31 March and submit your updated financial statements. A stronger current year could result in higher borrowing capacity, giving you access to more funding.
THE ROLE OF MORTGAGE PRE-APPROVALS
Keep in mind that mortgage pre-approvals typically expire after 60-90 days.
If your pre-approval lapses after the 31st March and you need to reapply, the bank will require updated financial accounts.
HOW TO MAKE THE RIGHT MOVE
Here’s what to consider based on your business performance:
1. If Your 2024 Revenue Is Better Than 2025:
Submit your loan application before 31 March 2025, so you can use your stronger financial accounts from the 2024 financial year.
This will maximise your borrowing potential.
2. If Your 2025 Revenue Is Better Than 2024:
Wait until after 31 March 2025 to submit your financial accounts.
Presenting stronger current-year revenue will give you access to higher lending amounts.
3. Use Pre-Approvals Strategically:
Pre-approvals are a great tool to secure financing while you finalise your plans, but remember their expiration timelines, especially as they relate to the financial year-end dates! If your situation changes, such as needing updated financials, this could impact your loan amount.
MAKE YOUR FINANCIALS WORK FOR YOU
As a self-employed borrower, understanding how timing and financial performance could impact your mortgage application is critical. Whether it's acting quickly to lock in lending based on stronger prior-year revenue or waiting to leverage your improved current-year accounts, having the right strategy makes all the difference.
Unsure about the best timing for your home loan application?
Get in touch with us here at WealthHealth! As a mortgage broker I have decades of experience in helping
business owners navigate these challenges, and I can help you tailor your approach, to secure you the home loan you need.
Our blog is not intended to be taken as personal advice and is for informational purposes only.
Before acting on this information, contact our mortgage broker to ensure it is suitable for your circumstances.