Last Updated: 27th December, 2018

Can Contract Workers Get A Home Loan?

Published by Otto Dargan on December 16, 2014


Many Australians have chosen to take the leap into contracting and freelancing not only to secure better pay but to have the flexibility to work their own hours in an organisation that will better appreciate their skills and experience.

In fact, the most recent ABS Forms of Employment Survey found that there are almost one million Australians who work as independent contractors in their main job or 9 per cent of all employed people in Australia.

On top of the high proportion of contractors and freelancers currently working in Australia, the majority of them earn a great income for their skills. Despite this, it is a real challenge for contractors and freelancers to get approved for a home loan.

Call us on 1300 889 743  or complete a free assessment form and one of our experts in contractor home loans can help you find the best home loan for your situation.

How much can you borrow?

  • 90% of the property purchase price including LMI: If you’re in the medical field, we know lenders that will waive the cost of LMI for loans up to 90% of the purchase price depending on your profession and income.
  • 95% of the purchase price (if you’re in a strong financial position)
  • 100% of the purchase price (only available as a guarantor loan)

You can qualify for a home loan

Are you self-employed & contract to one main employer?

Normally, you’d need to be contracting for at least two years before you could get a home loan but one of our lenders can approve your loan even if you’ve only worked in your job for a day!

What you need:

  • Self-employed workers must contract to only one main employer.
  • Last 3 months’ invoices.
  • Last 3 months bank statements.
  • Last financial year payment summary for Notice of Assessment.
  • Previous tax returns.

Are you on a fixed term contract?

Short to long term contracts are common for pay-as-you-go (PAYG) contractors. You will need:

  • 2 most recent payslips.
  • Employment letters for the businesses that you’re contracting to.

Are you a fly-in fly-out mining engineer?

They are some of the highest paid contractors in Australia, with the average mining engineer contractor working in an underground coal mine in New South Wales earning between $145,000 and $160,000 (Stellar Recruitment Salary Guide 2013-14).

The problem for most banks is that mining contractors may have fixed term employment or may move between mines depending on the availability of work.

Banks also tend to have a problem with their income. Since mining contractors are usually 28 days on and 28 days off, the income you earn varies month to month and this will be reflected in your payslips.

We know lenders that take a common sense approach by looking at your year to date income rather than your FIFO payslips. They also understand that you can find alternative work in the event that your contract is not renewed.

Read our mining engineer page to discover if you’re eligible for home loan discounts!

Are you an IT contractor?

An IT consultant in NSW can earn as much as $1,500 a day (ICT Salary & Employment Index, Peoplebank, Spring 2014) but many lenders do not understand their industry. In particular, not many are aware that IT specialists are in high demand across many industries in Australia.

IT contractors are the most common type of contractor we work with and because of their demand and high incomes, we consider them to be a low risk.

Find out why we’re experts in IT contractor home loans

Are you a subcontractor?

You will need to provide:

  • 2 years tax returns.
  • Taxable income should be averaging the same.

Self-employed contractors with no staff and no major expenses can usually get approved for a loan.

For example, if you’re a construction worker that only provides labour and don’t buy your own tools or material, you’ll be assessed like any other contractor.

Are you a freelancer?

We assess you as a sole trader of your own business. You will usually need to provide:

  • Last two years tax returns.
  • If you’re borrowing 80%, some lenders will accept an employment letter to evidence your income and future employment stability.

If your last two years tax returns are not showing the true potential of your income there may be a low doc solution available to you.

Call us today on 1300 889 743 or complete our free assessment form to find out what home loan options are available to you.

Why do contractors struggle to get a home loan?

Contractors are typically viewed in the same light as casual employees by the banks, that is, having a very unstable employment position with a chance of having their contract cancelled.

By applying with the right bank and working with a specialist mortgage broker like Home Loan Experts you have a much better chance of getting your loan approved.

Although we know non-conforming lenders that want to work with contractors and freelancers, we will always try to get you approved with a major lender that can offer you a competitive interest rate. It’s about matching you with a lender that takes a common sense approach to your employment structure and income.

In addition, all of the typical loan features that you’d normally find for home loans for full time workers, including professional packages, basic loans, line of credit and fixed rates, are available to contractors.

Call us today on 1300 889 743 or complete our free assessment form to find out how we can help you.

Why do people choose contract or freelance work?

In Australia, there are currently 367,000 employees engaged on a fixed term contract and almost 610,000 ‘other business operators’ (people managing their own business) according to the ABS.

Of all independent contractors, the highest proportion work in the construction industry (31%), followed by the professional, scientific and technical services industry (15%).

The highest proportion of independent contractors work as technicians and trade workers (30%; 293,000) and professionals (23%; 231,600).

Notably, as age increases, the proportion of employees tends to decrease while the proportion of independent contractors and other business operators increases. In fact, as many as 10% of employed persons aged 35-54 years are independent contractors and other business operators, respectively.

The reason behind this is that people in mid-career tend to want to have more control over their work life balance and have enough experience to be in position to make that career change.

The growth of independent contractors and ‘other business operators’ has slowed since 2010 but this may be set to reverse as economic conditions improve in Australia and more people reach the age where they can use their experience, education and training to move into contract roles.

Technology has facilitated this trend, particularly in regards to freelancers who can work on jobs from home at any hour of the day or night.

Organisations who want to engage the best talent to achieve specific results have been looking beyond those working under a traditional employer-employee model. Frustratingly, most banks have failed to move with the times.

Luckily though, we’re experts in helping contract workers get approved for a loan and have a panel of more than 40 lenders to choose from.

Let us find the right home loan solution for you. Simply call 1300 889 743 or complete our free assessment form.