How to get a home loan as a casual worker or freelancer

Casual and freelance workers typically find it more difficult to get a home loan.

Casual and freelance workers typically find it more difficult to get a home loan. Photo: Getty

Soaring property prices are pushing home ownership beyond the reach of an ever larger group of Australians, but one class of worker is at a particular disadvantage.

Casual workers accounted for about 19 per cent of the Australian workforce in 2020, according to the Australian Bureau of Statistics.

Their often unstable income makes it difficult for them to get a home loan at the best of times, let alone during a housing boom that has pushed up prices by almost 17 per cent in just 12 months.

Yet mortgage brokers who spoke to The New Daily said all is not lost.

Here’s the advice they had for casual and self-employed workers hoping to get a loan.

What is the main thing banks are looking for in home loan applications?

Experity director Clint Howen said when it comes to home loan applications, banks generally look for a good employment history, along with good savings or equity.

Mr Howen said although a full-time salary worker can typically qualify for loans from every bank in Australia, the pool of lenders shrinks for other types of workers.

Casual or self-employment can be associated with financial instability, which makes it harder for some people to find a home loan.

Johnston Grocke mortgage broker Nicole McBryde said casual workers can improve their chances of getting a loan by proving they have set minimum hours or have worked with one employer continuously for at least six months.

She said self-employed people will typically have to prove they have been established as a business or sole trader for one to two years.

“The biggest thing that banks are looking for is consistency,” Mr Howen said.

“It’s OK to have a casual job, but you still have to show that you’ve been doing it for a set period of time, and that … you consistently bring in the same income.”

What is a low-doc home loan?

Low-documentation (low-doc) home loans are mortgages that can be applied for with fewer proof-of-income documents than required for regular home loans.

This makes them well suited to self-employed borrowers, but Mr Howen said the benefit comes at the cost of a higher interest rate.

“The less requirements something has, generally the more risk that loan is for the lender,” he said.

“So that’s where you can have options to get you across the line, but you’re probably going to have to pay for it … with a higher interest rate.”

Mr Howen said home owners shouldn’t necessarily be put off by the higher rates, as they won’t be locked into the loans forever.

“Just keep in mind that if situations change, you should review your situation, and then maybe look to qualify for one of the better loans as you get on,” he said.

“A low-doc loan could be helping get [your] foot in the door, and then [loan seekers might] want to get a full-time job … then you can look to transfer across into a more low-rate home loan.”

Which banks are more likely to give loans to casual or freelance workers?

Ms McBryde and Mr Howen found ANZ to be more favourable to self-employed people compared to the other big banks.

Ms McBryde said ANZ, along with RedZed, was suitable for self-employed people because it considered one year’s tax income for a loan application rather than the typical requirement of two years.

Among “non-conforming” lenders, Mr Howen named Pepper and Liberty as “standouts” for people with fluctuating income.

He said new lenders such as 86 400 were also more lenient and digitally focused.

How can people find the right home loan?

Because every person’s situation is unique, Mr Howen said people should ask a mortgage broker for help in finding a suitable home loan.

“I think some people just assume [they can’t get a home loan] because they work in a casual job,” he said.

“Before you write yourself off, go out and get advice from a few people who are in the industry, and they can guide you [regarding] what you can and can’t do, rather than just assuming because you’re in that situation, that [you can’t get a home loan].”

Topics: Home Loans
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