"I've been doing business for so many years, so why does the bank say my income is unstable and won't even approve an 80% mortgage?" This was the first thing Michael said in my office. He has been running an online store for three years, earning 80,000 a month, and wants to buy a starter home worth 5 million, but he hit a wall when applying for a mortgage.
If you are also self-employed—whether running a company, working as a freelancer, or managing a small business—you must understand this helplessness. Clearly, your income is not bad, and may even be higher than that of an employee, but in the eyes of the bank, your 'income proof' is not 'stable' enough. What’s even more frustrating is that when you want to apply for a high loan-to-value mortgage (80% or 90%), the threshold becomes outrageously high.
But the fact is: self-employed individuals can absolutely successfully apply for a 90% mortgage, and the key lies in whether you understand the 'rules of the game' of banks and mortgage insurance companies. In today's article, I will use 15 years of real estate mortgage experience to break down practical strategies for self-employed individuals applying for high loan-to-value mortgages, helping you avoid common pitfalls and greatly increase your approval chances.
The Core Challenge for Self-Employed Individuals Applying for a 90% Mortgage
How do banks define 'self-employed individuals'?
In mortgage approval, banks have a broader definition of 'self-employed individuals' than you might think:
- Sole Proprietor: Operates a personal company or studio
- Partner: Holds more than 10% of company shares
- Freelancer: Has no fixed employer, relies on projects for livelihood
- Practitioners primarily earning commission: Such as real estate agents and insurance brokers (even if employed by a company, income mainly comes from commission)
:::warning Key Reminder: Even if you receive a salary from the company, if you hold 10% or more of the company's shares, the bank will still consider you self-employed, and the approval criteria will be stricter. :::
Why is it particularly difficult for self-employed individuals to apply for a mortgage?
Banks and mortgage insurance companies (such as HKMC) are most concerned with 'income stability' and 'repayment ability.' For self-employed individuals, they mainly have three major concerns:
- Income volatility: Business has peak and off seasons, and income is not as "fixed monthly" as that of salaried employees.
- Reported taxable income is relatively low: Many self-employed individuals, to save on taxes, report part of their expenses as business costs, making their taxable income appear very low.
- Complicated documentation: Without fixed pay slips, more financial documents are needed to prove repayment ability.
These factors make banks more cautious when approving loans, especially when applying for high loan-to-value mortgages (80% or 90%), as the requirements of mortgage insurance companies are even stricter.
Basic Threshold for 90% Mortgage
According to the current mortgage insurance program, applying for a 90% mortgage requires meeting the following conditions:
- Property Price Cap: 10 million or below (for first-time homebuyers)
- Property Type: Only completed residential properties (off-plan properties not applicable)
- Applicant Status: Regular salaried employees are easier to approve; self-employed individuals need to provide additional documentation
- Debt Service Ratio (DSR): Not exceeding 50% (not exceeding 60% under stress test)
:::tip Insider Tip: Even if you are self-employed, as long as you prepare sufficient documents and choose the right bank and mortgage broker, your chances of successfully applying for a 90% mortgage are definitely not low. :::
A Practical Guide for Self-Employed Individuals Applying for a 90% Mortgage
Prepare complete and "neat" income proof documents
This is the core of the entire mortgage application. Banks and mortgage insurance companies will assess your repayment ability based on the documents you provide, so the more complete and 'professional' your documents are, the higher the chances of approval.
#### Essential Document List
- Tax Returns for the Past Two Years: This is the most important proof of income, as banks use the "taxable income" reported in your tax return as the basis for calculation.
- Audited Financial Statements for the Past Two Years: If you have a limited company, you must provide financial statements audited by an accountant.
- Company Bank Statements for the Past 6 Months: To prove that the company has a stable cash flow.
- Personal Bank Statements for the Past 6 Months: To show your personal income transactions.
- Business Registration (BR) and Certificate of Incorporation (CI): To prove that the company operates legally.
:::highlight Expert Advice: If your reported income is relatively low, you can additionally provide a "Company Profit Statement" or "Client Contracts" to prove that your actual income is higher. Some banks will accept these supplementary documents as a reference. :::
#### How to Make Your Proof of Income More 'Attractive'?
- Plan your taxes early: If you plan to buy a property in the next 1-2 years, it is recommended to adjust your tax strategy in advance and appropriately increase your reported income (of course, legally and compliantly).
- Keep your company bank account active: Ensure regular inflows and outflows of funds, and avoid having a long-term zero balance or sudden large deposits (banks may suspect temporary 'manipulation').
- Prepare client contracts or invoices: If you are a freelancer, providing contracts or invoices from long-term clients can prove that you have a stable source of business.
Choosing the Right Bank and Mortgage Broker
Different banks have very different approval standards for self-employed individuals. Some banks are more friendly towards self-employed people and are willing to accept more flexible income proof; others are very conservative and only look at tax return figures.
#### Which banks are more friendly to self-employed individuals?
Based on my experience, the following types of banks are more lenient towards self-employed individuals applying for high loan-to-value mortgages:
- Small and medium-sized banks: such as China CITIC Bank, Dah Sing Bank, etc., with more flexible approval processes
- Banks collaborating with mortgage insurance: such as HSBC, Hang Seng, Bank of China, etc., familiar with the requirements of mortgage insurance companies, able to provide more professional advice
:::tip Insider Tip: Don't apply to just one bank! It is recommended to submit applications to 2-3 banks simultaneously to increase the chances of approval. However, be aware that multiple credit report (TU) checks in a short period can affect your credit score, so it is recommended to handle this through a mortgage broker. :::
#### The Importance of Mortgage Brokers
An experienced mortgage broker can help you:
- Pre-assess approval chances: Recommend the most suitable bank based on your financial situation
- Optimize document preparation: Guide you on how to organize documents to increase approval rates
- Communicate with banks: Help explain special situations during the approval process to obtain better terms
'Bonus Points' to Increase Approval Chances
In addition to the basic documents, the following points can greatly increase your chances of mortgage approval:
#### Add a Guarantor or Joint Applicant
If your spouse or family member is a salaried employee, you can consider applying jointly or adding them as a guarantor. This way, the bank will combine both incomes in the calculation, increasing the payment-to-income ratio and improving the chances of approval.
:::success Success Case: I have a client who is a freelance photographer, with a declared tax income of only 30,000, but his wife is a civil servant, earning 40,000 per month. By applying jointly, they successfully obtained a 90% mortgage and purchased a starter home worth 6 million. :::
#### Provide More Proof of Assets
If you have other assets (such as stocks, funds, or fixed deposits), you can provide the relevant proof to let the bank know that you have sufficient financial strength to handle unexpected situations.
#### Choose a longer repayment period
Extending the repayment period to 30 years can reduce the monthly payment amount, increase the contribution-to-income ratio, and make it easier to pass the stress test.
Common Mistakes and Pitfall Avoidance Guide
Misconception One: The lower your taxable income, the better?
Many self-employed individuals, in order to save on taxes, try to report lower income. However, doing so will directly affect mortgage applications, because banks only calculate repayment ability based on your reported income.
:::warning Pitfall Avoidance Advice: If you plan to buy a property in the short term, it is recommended to moderately increase your reported income 1-2 years before purchasing. Even if you pay a bit more tax, the result is a higher mortgage approval amount, which is absolutely worth it. :::
Misconception 2: Can you get by with temporary 'fudging'?
Some people, before applying for a mortgage, suddenly transfer large sums of money into their company account or personal account, hoping to 'make the accounts look better.' However, the approval staff at banks and mortgage insurance companies are experienced and can easily see through this tactic.
The bank will focus on reviewing:
- Whether the source of funds is reasonable
- Whether the bank statements have unusually large deposits
- Whether the company's cash flow is consistent with the scale of its business
:::warning Pitfall Avoidance Advice: Don't wait until the last minute to scramble; early planning is the key. If you really need to provide proof of funds, it is recommended to offer a reasonable explanation (such as receiving a large payment from a client, selling assets, etc.). :::
Misconception Three: Only looking at mortgage interest rates while ignoring approval difficulty
Many people, when choosing a bank, only focus on which bank has the lowest mortgage interest rate, but overlook the difficulty of approval. For self-employed individuals, whether they can successfully get approved is more important than the interest rate.
:::tip Insider Tip: It's better to choose a bank with a slightly higher interest rate but more lenient approval criteria, rather than risk choosing a bank with the lowest rate but extremely strict approval. Once you successfully get on board, you can always transfer your mortgage to another bank to get a better rate. :::
Misconception 4: Thinking that freelancers definitely can't apply for high LTV mortgages
Many freelancers think that without a company or audited financial statements, they definitely can't apply for a 90% mortgage. But the truth is not like that.
Freelancer's Coping Strategies:
- Provide tax returns for the past two years
- Provide customer contracts or invoices to prove a stable source of business
- Provide bank statements showing regular income deposits
- If necessary, a guarantor with a fixed salary can be added
:::success Success Case: I have a client who is a full-time YouTuber without a company, but he provided tax returns for the past two years, YouTube revenue statements, and bank statements. He ultimately successfully applied for an 80% mortgage (because the property price exceeded the 90% mortgage ceiling, but this was already a very ideal result). :::
Summary: Getting on the property ladder for self-employed individuals is not a dream
As a self-employed person, applying for a 90% mortgage is indeed more difficult than for those who are employed, but it is by no means impossible. The key lies in whether you plan ahead, prepare sufficient documentation, and choose the right bank and mortgage broker.
Key Points Review:
- Plan your taxes early: Appropriately increase taxable income to pave the way for future mortgage applications
- Prepare complete documents: Tax returns, audit reports, bank statements, client contracts, etc.—the more complete, the better
- Choose the right bank: Different banks have significantly different approval standards for self-employed individuals, so it is recommended to apply to multiple banks simultaneously
- Consider joint applications or guarantors: If your spouse or family member has stable salaried income, it can greatly improve the chances of approval
- Avoid last-minute 'number manipulation': Banks can easily detect it, which may negatively affect approval
Remember, the era of affordable rents has arrived. As long as you are well-prepared, self-employed individuals can also successfully buy a property and even accumulate wealth through real estate investment.
Want to learn more about mortgage strategies or need professional advice?
If you are self-employed and are considering applying for a high LTV mortgage, feel free to leave a comment below to share your situation, or send us a private message to get a free mortgage assessment. Our professional team will provide the most suitable mortgage plan based on your financial situation to help you successfully purchase a property!
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