An alternative financing option for self-employed individuals

Accountant letter loans, sometimes called low doc or alt doc loans, are an alternative way of proving your financial position when, for one reason or another, you as a self-employed individual are unable to show tax returns or meet the rigid lending criteria of a bank. For this purpose, non-bank lenders will extend credit based on a declaration written up by your accountant.

Key requirements

There are certain requirements you must fulfill for an accountant letter loan to be appropriate:

You must know an accountant for in excess of six months

Your tax returns must not be completed for that financial year

If tax returns are completed, lenders will require those returns

When is an account letter loan used?

A business has not been open for 24 months (a strict banking requirement)

Previous tax returns do not represent the current state of the business

Important Note: Accountant letter loans are always a short-term solution and should be refinanced into a major bank lender when tax returns reflective of the individual have been lodged.

Financial implications

Lenders that accept accountant letter loans typically:

• Price these loans at a higher level of risk

• Rely on a truthful declaratory statement from the accountant rather than financials declared to the Australian Taxation Office

As a result, you can expect:

• 1 to 2% increase in interest rates compared to bank lenders

• Potential additional fees depending on the loan-to-value ratio

Loan specifics

Typically, lenders will:

• Provide 70% of the purchase price for the home loan

• Require you to provide a 30% deposit plus expenses for stamp duty

  • Note: This may be reduced if you're eligible for stamp duty waivers

Broker support

As brokers, we:

• Typically charge fees for accountant letter loans

• Can integrate these fees into the lending to avoid out-of-pocket expenses

• Understand that holding an accountant letter loan is often not a reasonable long-term financial decision

Our commitment is to:

• Refinance you out of an accountant letter loan once you become eligible

• Assist you even when we may not be paid by the lender

• Act in your best interest by helping you transition to a more standard loan structure

Final thoughts

Accountant letter loans can be a valuable tool for self-employed individuals facing traditional lending challenges. However, they should be viewed as a temporary solution with a clear path to more conventional financing.

Talk to us today if this sounds like a solution for you.

Disclaimer: This information is general in nature. Always consult with a financial professional to understand how these loans might apply to your specific financial situation.