Lenders view on Contract Income

[myhillg]

I'm considering a move to a new employer and want to know how it would affect my borrowing power.

Employer would be a NSW Gov Department, but the terms of the employment would be a rolling 6-month (possibly 9-month) contract and remuneration is given in a per hour rate (+ super).

The recruiter has indicated that this is normal and in most cases the contracts are renewed or eventually become permanent.

How do lenders asses this income? Would I be able to borrow against the full annual salary or the contract value or something else?

The role is good and the hourly rate is better than where I currently am, but I don't want to back myself into a corner if I want to refinance or purchase in the next year or so.

 

[Shahin_Afarin]

Depends on LVR and if you are paid PAYG or to an ABN.

Over 80% LVR and paid to an ABN is not a good combo. Everything else is *fine* but the standard stuff applies like any other application like duration of current employment, occupation, line of work ,etc.

If you go over 80% depending on the lender they may take NOA figures instead of current rolling contract figures. So just because you are on a $300k contract doesn't mean they will calculate it that way for servicing/borrowing capacity.

 

[Marty McDonald]

It depends on the circumstances of course but if there is no holiday or sick pay I have successfully presented (this is sub 80% by the way) as follows:

Hourly rate net of recruiter fees /1.095 for super x hours per week worked (as stipulated in contract ) x 46 weeks a year. This allows for 4 weeks holiday leave and 2 weeks sick leave.

 

[myhillg]

thanks Shahin,

It would be PAYG... and definitely not 300k!

That's sounds reasonable - so I could wait 6 months or so and apply on payslips up to 80%

If I wanted to go higher than 80% may need to apply on the last NOA - in that case if I have a decent depreciation claim my serviceability suffers and would wipe out any income increase...is that right?

Doesn't seem right to have the non-cash items considered in serviceability calcs...

 

[Shahin_Afarin]

thanks Shahin,

It would be PAYG... and definitely not 300k!

That's sounds reasonable - so I could wait 6 months or so and apply on payslips up to 80%

If I wanted to go higher than 80% may need to apply on the last NOA - in that case if I have a decent depreciation claim my serviceability suffers and would wipe out any income increase...is that right?

Doesn't seem right to have the non-cash items considered in serviceability calcs...

No I'm referring to the total gross figure you earned in that financial year for your PAYG income.

@ 80% LVR you don't need to wait 6 months but don't want to sugar coat it either - you will need to massage it through at 80% and just started employment. A lender like NAB is good in this space but so are a few others lenders.

 

[Peter_Tersteeg]

You can probably secure finance within 2 payslips of commencing the contract. It's not a difficult for contrators as many people seem to believe.

 

[myhillg]

alright....thanks all

All i need to do is actually get the job now!

 

[Mick C]

It would be PAYG...


..

PAYG- if your in IT/ Nursing/ Medical ( Dental/ radiographer) / Engineer/ Teachers and you have an good last 2 years history of working with no major gaps in the same field...1-2 payslips will get you over the line even on an 6 month contact ( of course lenders choice is def limited....and 80% VR is preferred but 90% can can be accepted for the right servicing and client fit)