Cash out refinance when you are self-employed

With two years of returns and financials, the self-employed borrower is assessed on add-backs and averaged income and can access the same cash out as any borrower. The purpose can be personal, investment or business, and the lender may want evidence for larger amounts. Business purpose cash out for the borrower's own business is common and is assessed with the business financials already in the file.

Lenders verifying income from BAS or bank statements carry more risk and limit cash out accordingly. Typical policy caps cash out at 65 to 75 per cent LVR, limits the amount to a set figure such as $100,000 to $250,000 without further evidence, and requires the purpose to be stated and sometimes documented: an investment purchase contract, a business invoice, an ATO statement. Cash out for debt consolidation is often allowed within limits; cash out for unspecified purposes is generally not.

A common sequence is a low doc cash out to fund a business need or clear a tax debt now, followed by a full doc refinance at a better rate once the next tax return is lodged. The specialist plans the low doc loan with an exit in mind: no long fixed terms, no heavy exit fees.

Whether the latest return is lodged, because a return in progress can sometimes be finalised quickly and turn a low doc file into a full doc one. Whether the BAS supports the income claimed. Whether the purpose fits the lender's policy. And whether the LVR after cash out leaves room for the lender's low doc cap.