Can I get a home loan as an independent contractor?

Getting a home loan with a low rate while you’re an independent contractor or freelancer is possible if you know where to look.

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by Gary Andrews

Last update 15 Oct 2021

Overview

Contract work is steadily on the rise.

By some estimates, contractors will make up more than a third of the workforce by 2023.

But when it comes to getting a home loan as an independent contractor or self-employed freelancer, some banks and lenders haven’t caught up yet.

This can make the application process trickier if you don’t have regular payslips from an employer.

That said, getting a home loan with a competitive rate and great features is doable if you know where to look.

Here’s how it all works.

Key Points

bulletMany, but not all, banks and lenders offer home loans to independent contractors and self-employed people.
bulletAs a general rule of thumb, getting approved is more straightforward if you’ve been contracting or self-employed for at least two years.
bulletA good mortgage broker will know which banks and lenders are most likely to approve your application and offer competitive rates and fees.
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Why do banks prefer not to lend to independent contractors?

When you apply for a home loan, one of the first things a bank or lender will look at is your income: they want to see that you can afford to make repayments on the loan now and in the future.

Banks often do this by checking your regular payslips.

This can be a problem if you’re an independent contractor or self-employed.

You might not have fixed income every month or you might be paid different amounts throughout the year.

That means some banks exclude contractors and freelancers altogether, while others have special application requirements.

Can I get a home loan if I’m a contractor or self-employed?

Yes, you can.

Many banks and lenders have policies and processes for independent contractors, self-employed people and other 'non-traditional' workers.

As a general rule of thumb, getting approved for a home loan is more straightforward if you've been contracting or self-employed for at least two years.

But it’s still possible to get a home loan even if you’ve only just left a permanent role.

A mortgage broker can help you narrow down your choices, find a lender who’ll accept you, and help you identify the right loan for your situation.

Finding loans for contractors and self-employed Australians is one of our specialisms at Compare Club and we’d be happy to have a free, no obligation chat if you have any questions.

Can I get a mortgage if I’m on a fixed term contract?

It’s certainly possible.

Being on a fixed term contract with one employer can even give you an advantage because you’re usually classified as an employee and get regular payslips.

Whether or not you’re approved for a mortgage depends on your situation and the lender’s home loan approval criteria.

Generally speaking, if you apply for a home loan as a fixed term contractor, the lender will look at things like your current income, your financial history over the past couple of years and the length of your current contract.

How do independent contractors qualify for home loans?

Qualifying for a home loan as an independent contractor depends on the lender you apply with.

Most lenders will ask you to provide at least two years of tax returns to show reasonable income over that time.

This means your chances of being approved are higher if you’ve been contracting or self-employed for at least two years.

But your income isn’t the only thing banks and lenders focus on.

For any home loan application, banks and lenders will consider several factors including:

  • Your other loans and debts
  • Your living expenses
  • Your deposit amount as a percentage of the property value (called the ‘loan to value ratio’)
  • Whether you have children or other dependents
  • Your other assets
  • Your credit history
  • Whether you’re buying a property to live in or rent out

Every lender is different, so it’s a good idea to talk to a broker who understands the different application requirements and can walk you through your options.

Is it more expensive to get a home loan as a contractor?

Not necessarily.

If you have a solid income and tick all the boxes for the lender’s application criteria, you could even have access to some of the lowest rates and fees on the market.

Do you need a mortgage broker to get a home loan as a contractor?

You don’t need to, but a good broker or home loan specialist will know which banks and lenders are most likely to approve your application and offer competitive rates and fees.

They’ll also know which lenders will consider your application even if you’ve been contracting for less than two years.

A broker or home loan specialist can also talk you through the application process and the documentation you’ll need.

This can be especially helpful if you’re a first home buyer or you’ve never applied for a home loan as a contractor before.

What do I need to apply for a home loan as a contractor?

Some of the most common documents you might be asked for include:

  • Your two most recent tax returns (if you’re an independent contractor)
  • Two recent payslips and a PAYG summary (if you’re employed on a fixed term contract)
  • Quarterly Business Activity Statements (BAS)
  • Bank statements
  • Credit card statements
  • Other statements of debt or assets

If you’re working with a broker or home loan specialist, they can help you prepare your application and make sure you’ve got all the documentation you need.

How do I find the best home loan?

A home loan is probably one of the biggest financial commitments you’ll ever make, so it’s worth taking the time to research your choices and find a rate you’re happy with.

There are a lot of banks and non-traditional lenders out there, which means there are multiple options to consider even as an independent contractor.

When comparing home loans, consider:

  • Interest rates
  • Ongoing and one-off fees
  • Whether the loan is fixed, variable or split
  • Whether an offset account is available
  • Whether you can redraw on the loan
  • Whether you can make extra repayments

You can check out more tips for comparing home loans here.

Applying for a home loan as a contractor can be a bit more complicated than a standard application.

It's why it’s a good idea to speak to someone with expertise in this area, such as a mortgage broker.

If you’re an independent contractor or are self-employed, Compare Club’s home loan experts can help you find the right home loan with competitive rates, from a panel of 40 lenders.

Click the button below to get started.

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This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions.