# HL-Q014: Borrower journey I'm applying for my first home loan as a contractor. I have three years of earnings records. What will a lender want to see to understand my income properly? Borrower: Solo contractor buying a first home [Study](https://nzbrands.ai/research/banking/home-lending/) · Collected 11 October 2026 ## chatgpt Answer ID: 9e59e21c-8856-4211-a660-30a7b1c99d3c If you’re applying for your first home loan in New Zealand as a contractor, three years of earnings records is a useful starting point. The key is helping the lender understand how much income you genuinely earn, how reliable it is, and how much of it you can continue to earn while meeting your mortgage repayments. Unlike a salaried employee, whose income may be verified through payslips and an employment contract, a contractor often needs to demonstrate their income through financial statements, tax records, invoices and bank transactions. ## 1. The documents a lender will want to see 1. Annual financial statements for the last 2–3 years Ideally, have accountant-prepared accounts showing: - Revenue or contracting income. - Business expenses and net profit. - Your salary or shareholder salary, if you operate through a company. - A balance sheet showing business assets and liabilities. Many mainstream lenders ask for the last two years of financial statements, so having three years puts you in a good position to show the longer-term picture. [Preparing for a home loan appointment](https://www.bnz.co.nz/support/home-loans/buying-a-home/preparing-for-a-home-loan-appointment)[How to apply for a Home Loan](https://www.anz.co.nz/personal/home-loans-mortgages/how-to-apply/)[Gaining pre-approval](https://www.sbsbank.co.nz/home-loans/first-home-buyers/first-home-buyers-hub/step-by-step-guide/gaining-pre-approval) 2. Personal tax returns and IRD records Prepare your filed income tax returns for the last two or three years, plus the relevant income summaries or tax assessments from Inland Revenue (IRD). These help the lender cross-check the income declared in your application against your tax records. If you're a sole trader, your personal return is particularly important; if you operate through a company, company accounts and your personal income records may both be needed. [Gaining pre-approval](https://www.sbsbank.co.nz/home-loans/first-home-buyers/first-home-buyers-hub/step-by-step-guide/gaining-pre-approval)[APPPLICANT’S CHECKLIST](https://adviser.peppermoney.co.nz/content/dam/nzadvisor/pepper-nz-advisor-documents-nc/NZ%20Home%20Loan%20Application%20Form%20%28Long%29.pdf) 3. Invoices, contracts and evidence of ongoing work Gather: - Your current contracting agreement or agreements. - Recent invoices and evidence of payment. - Any upcoming work bookings, renewals or extensions. - Details of your hourly or daily rate and typical hours worked. These help explain whether your historical earnings are likely to continue. They can be especially useful if you recently increased your rates or have a new contract. 4. Business and personal bank statements Have at least your most recent three months of statements ready, and be prepared for a lender to request more. These show payments arriving from clients, transfers between your accounts, business expenses and your household spending. BNZ, for example, asks for recent transaction statements to understand living costs and financial commitments. [Preparing for a home loan appointment](https://www.bnz.co.nz/support/home-loans/buying-a-home/preparing-for-a-home-loan-appointment)[How to get home loan pre-approval](https://www.anz.co.nz/personal/home-loans-mortgages/buying/pre-approval//) 5. GST returns and current-year figures, if applicable If you're GST-registered, keep your GST returns available. A current-year profit-and-loss report can also help demonstrate that you're still trading at a healthy level since your last completed financial year. GST turnover is not the same as personal income: the lender needs to understand what remains after expenses and tax obligations. ## 2. How the lender will calculate your income This is often the most important part of the application. A lender generally wants to establish your sustainable income available to service a mortgage, not simply your total invoices or the amount of money passing through your bank account. For example, suppose your accounts show the following: | Financial year | Annual business net profit | | --- | --- | | Year 1 | $90,000 | | Year 2 | $110,000 | | Year 3 | $120,000 | | Three-year average | $106,667 | Illustrative figures only, before any lender-specific adjustments. A lender might use the most recent two years, an average, or a more conservative figure depending on its policy and your circumstances. The three-year average above is not automatically the income a bank will accept. They'll also look at: - Consistency: Is your income steady, growing or declining? - Concentration of clients: Does most of your income depend on one client or contract? - Business expenses: Are your operating costs reasonable and likely to continue? - Legitimate add-backs: Could certain expenses, such as depreciation, be added back when calculating income? This depends on the lender's policy and the expense. - Current trading performance: Is your latest financial year representative of what you're earning now? If you're operating through a limited company, your company’s profit, the salary you pay yourself, and any money retained in the company need to be understood together. The lender won't necessarily treat all company revenue or retained profit as your personal income. [How NZ banks assess self-employed income for a mortgage](https://mortgagesense.co.nz/self-employed-home-loans-nz/)[Self-Employed Mortgage NZ](https://trebla.nz/blog/self-employed-mortgage-nz)[Buying a property using self-employed income](https://www.nzmortgageadvice.co.nz/residential-lending-with-self-employed-income) ## 3. They will also assess whether you can afford the repayments Even with three strong years of earnings, the lender will review your wider financial position. Be ready to provide: - Deposit evidence: Savings, KiwiSaver balance and any gifted deposit documentation. - Personal expenses: Recent bank statements showing your normal household spending. - Existing debts: Credit cards, personal loans, vehicle finance and buy-now-pay-later facilities. - Business liabilities: Tax owing, business loans, leases or other ongoing commitments. - Identification: Passport or New Zealand driver licence, as requested. These are standard parts of assessing a home loan application, alongside income verification. [Preparing for a home loan appointment](https://www.bnz.co.nz/support/home-loans/buying-a-home/preparing-for-a-home-loan-appointment)[Gaining pre-approval](https://www.sbsbank.co.nz/home-loans/first-home-buyers/first-home-buyers-hub/step-by-step-guide/gaining-pre-approval) ## 4. How to make your application stronger Before applying, I'd suggest doing these three things: 1. Ask your accountant to prepare or review your latest financial statements and explain any unusual changes in income or expenses. 2. Prepare a simple one-page summary of your contracting history, annual income, current contract, rate and expected future work. 3. Speak with a mortgage adviser who regularly handles self-employed and contractor applications. Different lenders can assess the same income differently, so it's worth understanding their criteria before submitting multiple applications. One important point: don't assume you need to wait for another year of earnings. Three years of records is already a useful history, and some lenders primarily request two completed years of financial statements. Whether your records are sufficient will depend on how they're documented and your overall application. ## One question that will help me tailor this to you How are you paid as a contractor in New Zealand? --- ## gemini Answer ID: 36a405c9-aac4-4620-b4c8-6b4c1e91c881 Applying for your first home loan as a contractor is entirely achievable, especially since you already have **three years of earnings records**. Lenders look at contractors and self-employed applicants differently than PAYE employees because your income can fluctuate. They want to see consistency, sustainability, and an accurate picture of what you actually take home once business expenses are accounted for. To properly understand your income, lenders in New Zealand typically look for the following core documents and financial metrics: ### 1. Core Financial & Tax Documentation * **Two to Three Years of Accountant-Prepared Financial Statements:** Even though you have three years of history, mainstream lenders generally focus closely on the last **two financial years** (ending March 31st). These should include your Profit and Loss (P&L) statement and a Balance Sheet. * **IR3 Tax Returns:** Your personal tax returns filed with Inland Revenue (IRD) for the corresponding years must match your financial statements. Lenders use these to verify that the income you are claiming for your mortgage aligns with what you declared to the tax authorities. * **GST Returns (if registered):** Many lenders will ask for your last 6 to 12 months of GST returns. This helps them cross-check your business turnover and verify that your revenue is current and compliant. ### 2. Bank Statements (Business & Personal) * **Business Bank Statements:** Usually, lenders require **3 to 6 months** of statements for all business bank accounts. They check for regular cash flow, stable client payments, and to ensure you aren't carrying unmanaged overdrafts or debts. * **Personal Bank Statements:** Typically **3 months** of personal transaction history to review your everyday spending habits and living costs. ### 3. Understanding How Lenders Calculate "Lendable" Income A common misconception is that lenders look at your total contract revenue or gross turnover. Instead, they focus on your **net profit**. * **The Add-Back Process:** Lenders and accountants will often look at "add-backs"—legitimate business expenses that are non-cash items or discretionary (such as depreciation, home office expenses, or one-off asset purchases). These can sometimes be added back to your net profit to increase your assessable income. * **Averaging vs. Trend Analysis:** If your income has grown year-on-year over your three years, lenders will often use the most recent year or an average. However, if your income dipped significantly in year two, they will want to dig into why and may conservatively use the lower year or an average. ### 4. Supporting Context & Future Security * **Current Contracts or Invoices:** If you have ongoing, long-term contracts with major clients, provide copies. Demonstrating a secure pipeline of future work reassures the bank that your income will continue after you buy. * **A Brief Business Profile:** A one-page summary detailing what your contracting work involves, your industry experience, and your key clients can help loan officers who may not understand niche contracting fields. --- ### Recommended Action Plan 1. **Coordinate with your Accountant:** Ask them to prepare your latest year-end financials and inquire about generating a lender-friendly pack (such as a *Xero Business Finance Pack* if you use accounting software). 2. **Organize Tax and Bank Records:** Download your IR3 summaries directly from myIR and pull 6 months of clean business and personal bank statements. 3. **Engage a Mortgage Broker:** Because policies vary significantly between lenders (e.g., how strict they are with contractor income versus PAYE), a broker who specializes in self-employed/contractor mortgages can match you with the bank whose policy treats your specific income structure most favorably. Are you operating as a sole trader, or do you run your contracting work through a limited company? --- ## ai-mode Answer ID: a9088345-810e-40b6-aa68-9e21395e4fc6 Applying for a home loan as a contractor in _New Zealand_ means lenders will look a bit closer at your paperwork than they would for a standard salaried employee. Having three years of earnings records puts you in a strong position, as most New Zealand mainstream lenders typically look for a minimum of two years of self-employed or contracting history. To properly assess your income and work out your borrowing capacity, New Zealand lenders will want to see a comprehensive picture of your financial stability and cash flow. Key Documentation Lenders Want to See * * **Financial Statements:** Accountant-prepared Profit and Loss (P&L) statements and Balance Sheets for your contracting business or sole trader operation covering your trading history. [www.globalfinance.co.nz] * **Tax Returns and IR3s:** Personal and/or business tax assessments directly from Inland Revenue (IRD) confirming what you declared and paid tax on over the past three years. * **GST Returns:** Recent GST returns (if you are GST-registered) to cross-reference and verify your ongoing revenue trends. [www.globalfinance.co.nz] * **Personal and Business Bank Statements:** Usually 3 to 6 months of transaction history showing healthy account conduct, consistent business revenue, and personal living expenses. * **Contractor Agreements:** Your current or recent client contracts. Lenders like to see evidence of ongoing work, your hourly/day rates, or whether you have a steady pipeline of work rather than just one-off gigs. * How Lenders Calculate Your Income Unlike PAYE earners whose gross salary is taken at face value, lenders analyze _how_ you draw your money: * * **The Bottom Line vs. Add-backs:** Lenders typically base your borrowing power on your net taxable income (what your accountant shows after business expenses). However, a good mortgage broker can help identify legitimate "add-backs"—such as one-off equipment costs, personal vehicle depreciation, or non-cash expenses—that didn't actually restrict your personal cash flow. * **Consistency and Trends:** Because you have three years of records, the lender will look at the trajectory. If your income has grown or remained steady, they will take an average or use the most conservative recent figures. If there was a major dip in one of those years, expect them to ask why. * **Retained Earnings (If operating through a Company):** If you operate via a Limited Company and leave profits inside the business rather than paying yourself a full salary or dividend, lenders will look at company financials to see if those retained funds can be factored into your servicing ability. * You can read more about self-employed requirements on MoneyHub's Self-Employed Mortgage Guide. If you'd like to narrow this down, tell me: * Are you structured as a **sole trader** or through a **limited company**? * Do you use an **accountant** who files your returns directly? I can give you a clearer idea of how lenders might treat your specific setup. --- ## ai-overviews Answer ID: d9e32535-625e-45a2-aaeb-3bd64526632c To assess your contractor income, a New Zealand lender will primarily want to see **two to three years of financial statements and personal tax summaries (IR3s)**. Because you have **three years of consecutive earnings records** , you qualify for standard **Full Doc lending** , giving you access to the lowest available market interest rates. * * * Core Documentation Checklist Lenders require formal proof from [Inland Revenue (IRD)](https://www.ird.govt.nz) and your accountant to verify your exact net earnings. * **IR3 Summary:** Personal tax summaries for the last three years. * **Financial Statements:** Profit and loss statements showing your business revenue. * **Averaged Income:** Lenders typically average your last two or three years' net income. * **Downward Trends:** If your most recent year dropped, banks use the lowest figure. * * * Verifying Current and Future Stability Having historic records is excellent, but banks must ensure your contracting work is sustainable today. * **Current Contract:** A copy of your active, signed client contract. * **Continuity Proof:** Documentation showing a consistent history in your industry. * **GST Returns:** Your most recent 6 months of GST returns, if applicable. * * * Bank Account History and Affordability Lenders will scrutinise your personal cash flow to satisfy New Zealand’s responsible lending laws. * **Bank Statements:** 3 to 6 months of personal and business account statements. * **Expense Audit:** Transparent tracking of your living costs and debt repayments. * **Tax Provisioning:** Clear evidence that you put aside funds for provisional tax. * * * Alternative Options to Keep in Mind If your latest tax returns show a heavy amount of write-offs or deductions that artificially lower your net income, you have backup paths: * **Primary Strategy (Full Doc):** Stick to main banks like [ANZ](https://www.anz.co.nz), [ASB](https://www.asb.co.nz), or [Westpac](https://www.westpac.co.nz) using your 3-year averaged net profit to get the lowest interest rates. * **Alternative Route (Alt Doc):** If your net taxable income is low due to deductions, use a specialist lender like [Pepper Money](https://www.peppermoney.co.nz). They can look at 6 months of business bank statements or GST returns instead of your historical tax returns. * * * If you'd like to dive deeper, let me know: * Are you operating as a **sole trader** or through a **registered company**? * Has your income **grown or fluctuated** significantly over these three years? * Do you know if your household income falls under the **[Kāinga Ora First Home Loan](https://kaingaora.govt.nz/home-ownership/first-home-loan/) caps** ($95,000 for individuals, $150,000 for couples)?