Melanie Hearse - 8 Jul, 2020
Working a casual gig but keen to get a home loan? Here’s what you need to know.
Getting a home loan without a full-time job may seem tougher, it is certainly doable and worth doing all the usual due diligence and comparisons to ensure you get the best deal available to you. The first step to being approved for a home loan as a casual employee is understanding how your home loan will be assessed.
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A potential lender is also likely to take a closer look at your outgoings – with responsible lending now mandated at a Government level, lenders are obligated to take a closer look at how we spend and save, right down to if our bills are paid on time to ensure they are not selling a product that is not suited to the consumer.
That said, the key player in determining both how much you can borrow and at what interest rate is your income. As with permanent full time and part time employees, this requires copies of pay slips, though obviously these will be assessed slightly differently for casual employees.
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If you haven’t been employed casually for two years, you may be out of luck with some lenders, but certainly not all. Some will instead use the Year To Date (YTD) gross income shown on your payslip and use it to calculate your likely annual income.
Given the fluctuating nature of casual work – by definition hours are not set or guaranteed they’ll use this information to make the most accurate assessment of your likely income while you’re servicing your loan.
Most lenders require a casual employee to be in their job for at least 12 months, however, it’s not a deal breaker. Lenders will want to see at a minimum:
Casual employment comes in all shapes and sizes, and your employment status does form part of the assessment of your loan. FairWork explains you’ll be considered a casual employee if your job carries no firm commitment in advance from your employer about how long you will be employed for, or the days (or hours) you will work. Likewise, a casual employee is not committed to all work an employer might offer. Casual employees:
As a casual employee, you are entitled to casual loading – a higher pay rate than equivalent full-time or part-time employees, to cover benefits full or part time employees can access.
Some casual employees work for one employer for a long period and become ‘long term casuals’. While you can claim some extra benefits including parental leave after at least 12 months of being engaged regularly by an employer on a casual basis, you will still not be entitled to paid leave or notice of termination, even if you work regularly for a long time.
Lenders who offer home loans to casual employees understand there are great variations between applicant circumstances, so putting together a strong application with as much supporting documentation as possible is key.
Related: The Home Loan Application Process
It’s important to understand that every time you apply for any type of loan, this goes in your credit report and forms part of the lenders risk assessment (your credit score is also made up of factors including the amount of money you’ve borrowed and whether you make repayments on time.) In short, don’t apply to several lenders as a way of ‘shopping around’ for the best deal.
That said, shopping around is still important before you apply for a loan. Rather than applying to lenders, you could use an online comparison engine to compare various loan products.
Aside from simplifying the home buying process, a mortgage broker can help from the very beginning of the process. They can:
You can broaden the playing field (the more lenders interested in loaning you money, the more selective you can be) and improve the terms of your loan as a casual employee in a number of ways.
Generally speaking, you can borrow up to 90% of the property value, or more if you have a guarantor or sizable deposit. While COVID-19 has bought more stringent lending into play – you may need to set your sights on a property you need to borrow a lower percentage or lower loan amount on for now, this is likely to recover.
Overall, the amount you can borrow depends on a range of factors such as your salary, living expenses, whether you are applying for a joint loan, interest rates, and many other factors. One way of estimating how much you could borrow is to use the eChoice Borrowing Power Calculator.
While being a casual employee may make securing a home loan seem tricky, with the right paperwork and some solid research, it is not mission impossible.
Words by Melanie Hearse
If you need help with your home loan, give eChoice a call! Our experienced brokers can help with finding the right loan for you and your situation.