Contract workers in the information and communications technology (IT) industry get the opportunity to work on many different projects throughout their career and enjoy higher than average daily rates and flexible working hours doing it!
In fact, a “functional” IT consultant in NSW can earn as much as $1,500 a day (ICT Salary & Employment Index, Peoplebank, Spring 2014).
That’s why it’s not surprising that Monash University’s most recent IPro Index survey found that IT consultants have the highest level of job satisfaction when compared to contractors in mining and engineering, banking and finance, as well as project management.
Unfortunately, some lenders don’t share the same level of satisfaction!
Due to a clear lack of understanding of the IT industry and the insatiable demand for skilled consultants, many IT contractors find themselves being shut down for a home loan.
This is despite the fact that for a number of years now, many companies have been outsourcing large parts of their business for cost efficiency and the need for specialist skills. This includes the same lenders that are declining loans for IT contractors!
Our mortgage brokers are self employed contractors like you so we know exactly what lenders take issue with.
Contracting is usually perceived as being the result of someone losing a full-time job. On paper, this doesn’t look good to a lender looking for a borrower with financial stability.
The problem is that taking this view is a very old-school way of looking at the world we live in. In fact, 60 per cent of contractors said that losing a full-time role played “no role” in their decision to work independently, the IPro Index survey found.
Employers are also paying less attention to this distinction, with the need for finding talent for short, mid to long term projects more important than long-term engagement with their business.
According to the latest employment trends report from recruitment agency Hudson, hiring intentions for information and communications technology staff had the strongest contractor employment outlook among Australian businesses at 29.4 per cent for the first quarter of 2014 compared to 25.2 per cent for permanent staff. The most highly sought after professionals were IT project managers, change managers and business analyst contractors.
Some of the biggest demand for IT professional is coming from the infrastructure space thanks to a number of major projects announced or in development by the federal and various state government, West Enterprise Solutions IT architect Jace Apaydin said.
The main problem for lenders is how long a contract will last but Apaydin said that even if you are full time PAYG, people in the IT industry switch jobs every two years anyway.
“I am contracting because the pay is good, I get to choose what I work on and for how long and I can claim expenses,” he said.
“Contracting is the reality in IT – I own two properties in Brisbane and never had issues with payments.”
Since IT consultants are the most common type of contractor that we work with, we take the view that they are actually a very low risk because of the low number of skilled IT consultants in Australia and the high demand from employers.
They enjoy quite consistent pay and work a minimum amount of hours so it’s as if they are PAYG contractors other than the fact that they pay their own tax.
They also have minimal expenses because most of it is covered by their employer. This is quite a different situation to a delivery driver who has fuel and other vehicle expenses.
We know lenders that use common sense rather taking a blanket approach to all contractors no matter what industry they work in.
When a contract is up and you start a new job, almost always you’re employed on a probation period. Even if you’re earning a great income from your new employer, it’s likely you’ll be told by your bank that you can’t apply for a home loan until the probation period has ended.
Luckily, not all banks have the same policy and we know who they are. Even if you’re employed on a contract basis, IT professionals who have a track record of consistent work can qualify for a loan with some lenders.
We may be able to get you approved for a home loan even if you’ve only been working for a day!
What if you’re not employed by the business you’re contracting to but are invoicing them instead? Unfortunately, IT professionals who are self-employed contractors are run through the wringer when it comes to applying for a home loan.
Most lenders require self-employed contractors to be in their current role for at least two years before they apply for a mortgage and supply two years tax returns as evidence.
We know lenders that take a much more common sense approach to the job stability of self-employed contractors and can approve your home loan based on:
- Bank statements
If your pay fluctuates significantly then you may also need to provide evidence of at least a 12 months employment history.
For one of our lenders, self-employed IT contractors eligible to borrow up to 90% of the property purchase price if you:
- Contract to one main employer
- Work for an hourly or daily rate
- Have no staff other than yourself
- No major expenses
Our mortgage brokers are self employed contractors themselves so we know exactly how best to help IT contractors.
Home Loan Experts has a strong track record in getting home loan approvals for IT contractors thanks to strong relationships with our panel of lenders.
Call us on 1300 889 743 or fill in our free assessment form to discuss your situation with us today.