Can I qualify for a mortgage?

With labour shortage gripping Australia, many people have taken the leap into contract employment to secure better pay.

Lenders often outsource their staff themselves yet, frustratingly, don’t seem to understand or support lending to contractors! Here’s how contractors can beat the banks.

Contract workers aren’t all treated the same!

Each type of contract worker is treated differently by the banks:

Are you a subcontractor?

Subcontractors can be employed on a PAYG basis or as a self employed contractor. Subcontractors are common in the mining and construction industries, with many working a commissioned job.

Are you a PAYG contractor?

PAYG contractors are employed on a fixed term, short term or long term contract, usually with an end date or in some cases with an automatic roll-over to a new contract.

They can receive normal holiday and sick leave benefits (depending on their contract terms) while also having their tax withheld and super paid for.

PAYG contractors and those working a commissioned job generally have to prove a strong track record of experience in the same industry as well as future employment stability. Many lenders require over 12 months in your current role as well as evidence that your contract will be continuous and ongoing.

However, one of our banks can consider lending to people employed on a PAYG contract with normal home loan rates even if they have one day on the job!

Do you need help with your mortgage? Our mortgage brokers are experts in lending to PAYG contractors. Please call us on 1300 889 743 or complete our free assessment form to discuss your situation with one of our specialists.

Are you a self employed contractor?

Self employed contractors are usually sole traders with a registered ABN who invoice their employer and then pay for any expenses such as their own wages from their business’ income.

In other cases they set up a company or trust which enters into the contract, which then employs them on a PAYG basis.

Management consultants in most cases come under the category of self employed contractors.

Most self employed borrowers need to be in their current role for two years before they can get a mortgage. However, one of our lenders looks favourably upon contractors and those working on commissioned jobs if they just contract to one main employer and if they work for a hourly or daily rate.

In these situations, you’ll need to prove your current income with your invoices as well as your prior income in past roles.

If you’re in a white collar profession and have no expenses of your own then we can help you even if you’ve been in your job for just one day!

If your pay fluctuates significantly then you may need to prove more than a 12 month employment history to enable the lender to accurately determine your income.

Generally the lender will calculate your average income less any GST component and taking into account 2 – 4 weeks in unpaid holidays each year.

We can help self employed contractors in most situations, even if they have set up their own company which invoices the company they contract to.

In particular, if you have no staff other than yourself and no major expenses, one of our lenders can approve a loan for you!

We deal with self-employed contractors on a regular basis so we know how to get your home loan approved!

Speak to a member of our team today on 1300 889 743 or complete our free assessment form and find out how we can help you obtain a mortgage!

Are you a mining contractor?

Mining contractors are a special case because they earn some of the best salaries in Australia. However, they may have fixed term employment contracts or may move between mines depending on the availability of work.

One of our lenders can approve mine worker home loans by taking a common sense approach and acknowledging that most workers can easily find alternative employment in the event that their contract is not renewed.

Are you an IT contractor or IT consultant?

IT consultants are the most common type of contractor that we work with. Specialist IT advisers are some of the highest paid workers in Australia yet many lenders don’t understand their industry and decline their loan applications!

Due to the low number of skilled IT consultants in Australia and the high demand from employers we believe IT industry contract workers are actually a very low risk and so we are happy to assist you.

Are you a construction contractor?

A construction contractor may work on a construction project until its completion or the contract may be rolling so that they continue to take on projects for the company. If the contractor provides his own materials he may be considered by the banks as being self-employed.

This means that he will be assessed in the same way as a self-employed contractor and may be required to provide the bank with two years recent tax returns. However, if they just provide the labour, they may be assessed like any other contractor.

Are you a freelancer or journalist?

Freelancers are typically paid on a per article basis or are employed for several projects.

As a freelance worker your income can be assessed using several different methods depending on the frequency, reliability and ongoing nature of your income.

Contractor home loan policies

What do the lenders think?

Contractors are typically treated like casual employees by the banks. They are considered to be in a very unstable employment arrangement with a high chance of having their contract cancelled, even if they are employed through a major contractor management firm such as Contract1 or Ambit.

What documents will I need to provide?

In most cases, you’ll be asked to evidence your income and future employment stability through a letter of employment.

If you require an employment letter template please contact the Home Loan Experts team on 1300 889 743 and our mortgage brokers will be able to provide you with one.

The secret to getting a home loan while working as a contractor is to apply with the right bank!

Please fill in our free online assessment form to speak to a mortgage broker who can help you to get approved!

Which lenders can help?

Contract worker home loans are usually sourced through major banks that specialise in ABN contractors & PAYG contractors.

Non-conforming non-bank lenders may also be able to help, however in most cases we prefer to work with major lenders as then you can get a very competitive interest rate.

Which loan types are available?

All loan types such as professional packages, basic loans, lines of credit and fixed rates are available.

How much can I borrow?

You can borrow up to 90% of the property value plus LMI (Lenders Mortgage Insurance) using a bank loan depending on what type of employment contract you have with your employer.

If you’re in a strong financial position we can help you to get approved for a 95% or 100% mortgage (100% only available as a guarantor loan).

What can I use the loan for?

The home loan can be used for home / domestic use, investing, purchases, mortgage refinances and construction purposes.

Who is this loan for?

This type of home loan is for PAYG contract workers / contractors, subcontractors and self employed contractors that have only themselves working in their own business and who contract to one main employer / client.

Low doc loans are also available.

Am I eligible for any discounts

Professional package and basic loan discounts are available and you should be eligible for a significant discount below the bank standard variable rate.

Our expert brokers know the policies of all the major lenders in Australia and know which ones are more willing to extend you a discount. Call us on 1300 889 743 or complete our free assessment form to talk to one of our mortgage brokers who can get you competitive rates for your home loan application.

What are the loan features?

All home loan features – interest only, fixed rate, line of credit, 100% offset, redraw, extra repayments – are available!

Apply for a mortgage today!

Contract employees usually have a high chance of getting their loan approved, if the loan is submitted to the right bank.

We are experts in this field and would love to help you buy a home even if you’re on income proection payments, or get a better interest rate by refinancing. We can even help mining contractors, IT contractors & freelance journalists who have great difficulty obtaining a loan from most banks.

Please call us on 1300 889 743 or complete our free assessment form for a quote for a contractor mortgage.

  • NSarkojee

    I am a self-employed contractor. Can I use my home to get a business loan?

  • Hi N Sarkojee,

    Yes, you may be able to use your home as a security and put the money into an your business. However please note that banks will still refer you to business banking and may charge you a higher rate but some lenders may provide you with discounts in par with home loans. So, it’ll be better if you seek help of a mortgage broker for more information.

  • moreno

    I’m an internet marketer and I’m working for a company on contract basis. I don’t get payslips but I can provide BAS and bank statements. I need a home loan to buy in QLD asap.

  • Hey moreno,

    Internet marketers can find it difficult to get a home loan as it’s an industry that many banks don’t understand, and as a result most internet marketers have their home loan applications declined. If you’re able to prove your income by providing two years of Australian tax returns then you can borrow up to 95% of the property value. With BAS and bank statements, also a letter from your accountant, you can borrow up to 80% if you can’t provide your tax returns.

    Please call us on 1300 889 743 to discuss this with an expert mortgage broker or complete our free online assessment form and one of us will contact you within 24 hours:

  • causat

    Is it possible to get a no LMI home loan even if I’m a contract worker?

  • Hi causat,

    You may be able to get a no LMI home loan if you earn over $120k a year, you’re not borrowing more than 85% of the property value, your credit history is clean and the property you’re buying is in a major metro area. Please check out the waived LMI page to learn more:

  • 1919hun

    Hi, I am a contractor working as a sole trader, with no staff. I want to buy a house and I need to borrow at 90%. I have genuine savings but my income varies each month a little. I should be able to meet serviceability requirements. Can you help me?

  • Hi, we will need a contractor employment letter saying that you have no staff and no expenses, and 6 months’ invoices and bank statements to back it up. This will help with the serviceability. We’ll also need to know what profession you’re actually in as we may be able to get you some discounts. Please call 1300 889 743 to discuss all this directly with one of our contractor loan experts.

  • Adam

    Hello. Can you just tell me the essential requirements that the letter must fulfill to be acceptable?

  • Australian lenders have similar requirements for employment letters and will often ask for a letter to be amended if it does not meet their requirements. Your employment letter must essentially fulfill the following requirements:
    – Be on a company letterhead that contains contact numbers and the company Australian Business Number (ABN).
    – Be signed and dated.
    – Contain the name of the person who signed the letter.
    – Contain the name of the employee, gross income, length of employment and status (permanent part time / casual etc) of employment.
    – Explanation of anything unusual about your employment, if required.

  • copey

    I have been working as a self employed contractor for the past 9 months. I have had 6 contracts already and usually 2 are running at a time. And work is picking up the pace so it’s only getting better and better. Despite this my home loan application was rejected by a major bank. What can I do?

  • Hi copey,
    Well a major reason for this can be because your ABN is of less than 12 months. You can wait for another 3 months and see if you get through this time. There’s also the possiblity of going low doc or commercial and get through using interim financials or a profit projection. Please feel free to call 1300 889 743 if you’d like to discuss with an expert home loan specialist.

  • Jason B

    I’ve been contracting for 6 months now and my ABN is also 6 months old. I’m planning on buying a house within the next 2 years and I should have my financials and ABN ready. I have thought of buying a studio apartment but seems banks don’t like it so much. Why is that?

  • Hey Jason,

    Australian lenders are a bit conservative when it comes to financing the purchase of studio apartments because they believe that a small unit is an unusual property – basically, there are less potential buyers that would be interested in such a property. Due to this, they believe that a studio apartment (which is usually a small property) may take longer to sell than an ordinary unit and marketability is a major factor that determines if the bank will lend and what they can offer. In our opinion though, this is an outdated policy as a studio apartment for a home is becoming increasingly popular.

  • jack long

    I want to get home loan to live in ( owner occupied ) with my both income together PAYG and ABN so can you please let me know is it possible and what documents banks ask for? Thank You. – Haresh

  • Hi Jack,
    Yes it is possible to use both your income from your job and your contracting business.
    There’s a variety of ways you can prove your contracting income such as:
    – Tax returns (2016 are ok)
    – BAS
    – Business bank statements
    – For contractors with no employees we can use invoices
    It just depends on what you do for work and what evidence you can provide as to which option is best.
    I’ll email you can cc our contracting specialist who can give you some more info on this.

  • Hunter

    I am a PAYG contractor and have been recently appointed for last couple of months. Is there any minimum period in my contract to obtain a home loan?

  • Hi Hunter,
    Most of the lenders have minimum time period such as 6 to 12 months in the industry. However, there is are one or two lender who don’t have any minimum time in the contract but you should provide your income documents such as tax returns and group certificate. Please call us on 1300 889 743 and one of our mortgage brokers will give you a call to discuss your situation.

  • Firoon

    I’m a defence contractor with a firearms manufacturing company in Sydney. I’m planning to buy a home loan; will the banks view my application any differently just because I’m a contractor?

  • Hi Firoon,
    It’s a fact that banks typically treat contractors like casual employees. However, if you could provide the right documents to them, then there are banks who could lend you a standard home loan. You have to provide evidence of your income and future employment stability through a letter of employment. It also helps if you can show evidence of regular contract work over your career and bank statements regular salary credits into your account over a period of 3-6 months. Please enquire online to speak with a contract employment home loan specialist and learn how we can help you.

  • Gareth

    I am a self-employed IT contractor and have been doing it for 18 months now. I’m looking to buy a house in next couple of months. I was wondering how the loan process works for contractors?

  • Hi Gareth,
    In most cases, self-employed contractors need to be in their current role for two years before they can get a mortgage. Luckily, our select few lenders look favourably upon contractors and those working on commissioned jobs if they contract to one major employer and if they work for an hourly or daily rate. In these situations, you’ll need to prove your current income with your invoices as well as your prior income in past roles.
    The key to getting a home loan while working as a contractor is to apply with the right bank! So, call us on 1300 889 743 and find out which lender is appropriate for you.