Being self-employed in Singapore no longer means you are excluded from getting a home loan, but it does mean the process is more complex. Banks assess self-employed borrowers very differently from salaried employees, focusing heavily on income consistency, documentation, and financial buffers.

Whether you are a business owner, freelancer, commission-based professional, or running your own company, understanding how banks evaluate self-employed income can make a significant difference to your loan approval outcome.

This guide explains the main ways self-employed persons (SEPs) can qualify for a property loan, the criteria banks use, and how you can structure your finances to improve approval chances.

Why Banks Are More Cautious With Self-Employed Borrowers

Banks are fundamentally risk managers. For salaried employees, income is predictable and stable. For self-employed individuals, income can fluctuate based on market conditions, business performance, or contract cycles.

As a result, banks typically:

• Require a longer income history
  
• Apply income haircuts
  
• Request more documentation
  
• Place more emphasis on financial buffers
  
  

This does not mean self-employed borrowers are disadvantaged, but it does mean planning and structuring matter far more.

Method 1: Using Notice of Assessment (NOA)

How Banks Use NOA for Self-Employed Applicants

The most common method banks use to assess self-employed income is through the Notice of Assessment (NOA) issued by IRAS.

Most banks require:

• At least 2 years of NOA
  
• Stable or increasing income across both years
  
  

Banks will usually take the average assessable income over the last two years to determine your eligibility.

Income Haircut Applied to NOA

Unlike salaried income, NOA-based income is typically subject to a haircut of around 30 percent. This is done to account for income volatility and business risks.

Example:

• Declared annual income: $150,000
  
• After 30 percent haircut: $105,000 used for assessment
  
  

This means a self-employed borrower may qualify for a smaller loan compared to a salaried individual earning the same amount.

When NOA Works Well

NOA-based assessment works best when:

• Income is stable or rising
  
• The business has been operating for several years
  
• There are no large year-to-year income fluctuations
  
  

However, for newer businesses or income that varies significantly, relying solely on NOA may limit loan quantum.

Method 2: Paying Yourself a Salary With CPF Contributions

Why This Is One of the Strongest Methods

If you are self-employed but pay yourself a fixed monthly salary and make CPF contributions, banks may assess you in a similar manner to a salaried employee.

When done correctly, this method allows banks to:

• Take 100 percent of your salary
  
• Apply no income haircut
  
  

This can significantly improve loan eligibility.

Key Requirements

Banks typically require:

• At least 12 months of consistent salary crediting
  
• Regular CPF contributions
  
• Clear documentation showing salary payments from company to personal account
  
  

Salary payments must be consistent in amount and frequency. Irregular or ad-hoc payments weaken the case.

Supporting Documents Needed

Commonly requested documents include:

• Bank statements showing salary crediting
• CPF contribution statements
  
• Company records confirming employment relationship
  
  

The clearer the separation between personal and business finances, the stronger the application.

Who Benefits Most From This Method

This approach is particularly effective for:

• Company directors
  
• Business owners with incorporated entities
  
• Professionals transitioning from freelance to structured payroll
  
  

Planning at least 12 months in advance is critical for this method to work.

Method 3: Using Show Funds

What Are Show Funds?

Show funds are liquid assets used to demonstrate financial strength and repayment capability. They provide banks with additional comfort, especially when income alone is insufficient.

Banks typically require:

• Show funds to be presented twice
  
• Once during loan application
  
• Once again around 7 days before key collection or loan completion
  
  

Amount Required for Show Funds

The common requirement is approximately 1.5 times the loan amount, though this may vary by bank and borrower profile.

Example:

• Loan applied: $1,000,000
  
• Show funds required: $1,500,000
  
  

The funds must be clearly traceable and readily verifiable.

What Can Be Used as Show Funds

Depending on the bank, acceptable forms may include:

• Cash balances(SGD or Foreign Currency such as USD)
  
• Fixed deposits
  
• Shares and listed securities
  
  

When using shares, banks may apply valuation buffers or require proof of liquidity to ensure the assets can be converted to cash if needed.

When Show Funds Are Most Useful

Show funds are particularly helpful when:

• Business income history is short
  
• Income fluctuates significantly
  
• The borrower has substantial assets but modest declared income
  
  

They strengthen the overall application but usually do not replace income assessment entirely.

Method 4: Using Pledge Funds

Understanding Pledge Funds

Pledge funds involve placing a sum of money with the bank as security for the loan. These funds are typically locked in a fixed deposit account for a defined period.

This significantly reduces the bank’s risk exposure.

Typical Structure of Pledge Funds

Common characteristics include:

• Funds placed in the bank’s fixed deposit
  
• Lock-in period usually 48 months
  
• Interest paid varies by bank
  
  

Some banks pay standard prevailing fixed deposit rates, while others may pay as low as 0.05 percent per annum.

Flexibility in Lock-In Period

Although 48 months is standard, in some cases:

• Lock-in can be reduced to 24 months
  
• In specific scenarios, 12 months may be possible (Contact us to find out more)
  
  

This depends on loan size, borrower profile, and internal bank policy.

Who Should Consider Pledge Funds

Pledge funds are suitable for:

• High-net-worth self-employed borrowers
  
• Clients prioritising approval certainty
  
• Those with excess liquidity who are comfortable with a temporary lock-in
  
  

While funds are tied up, this method often allows higher loan approval and smoother processing.

Combining Multiple Methods for Better Results

Banks are often open to combining assessment methods. For example:

• NOA plus show funds
  
• Salary with CPF plus pledge funds
  
  

A well-structured combination can significantly improve approval outcomes compared to relying on a single method.

Common Mistakes Self-Employed Borrowers Make

Many rejections occur not because income is insufficient, but because of poor preparation.

Common issues include:

• Applying without enough NOA history
  
• Inconsistent salary crediting
  
• Mixing personal and business finances
  
• Late or missing CPF contributions
  
• Underestimating documentation timelines
  
  

Addressing these issues early can dramatically change the outcome.

Planning Ahead Is Critical

Self-employed borrowers who plan ahead often enjoy:

• Higher approved loan amounts
  
• More bank options
  
• Better interest rates
  
• Faster approvals
  
  

Decisions on salary structuring, CPF contributions, and asset placement should ideally be made 6 to 12 months before property purchase.

Final Thoughts

Being self-employed does not prevent you from owning property in Singapore, but it requires a more strategic and informed approach.

Understanding how banks assess self-employed income, and choosing the right pathway based on your financial profile, can significantly improve your chances of success.

With proper planning and the right loan structure, self-employed borrowers can secure competitive mortgage packages similar to salaried applicants.

Do check out the latest rates here.