Getting a home loan when self-employed or work on a casual and contract basis
By Ginger Gorman
For Melanie, owning her own home — and getting a loan in her own name — was a hard four-year journey.
The 38-year-old creative writing lecturer jokes that it took her “47 jobs” and working up to 100 hours per week without taking holidays to finally secure her three-bedroom Brisbane Queenslander in 2019.
“I’m exaggerating, but if I went through my payslips and [short-term teaching] contracts with the different universities, I probably did technically have about 47 jobs,” she says.
“Every contract that you do counts as another job with the bank.”
As someone working primarily on a contract and casual basis, Melanie says it was impossible to get a clear picture of how to secure a loan.
She says her broker initially asked her to save $10,000 as a home deposit but when she reached that goal, he told her she needed a further $5,000.
“I used to get very frustrated … It’s very hard to see what you need to achieve,” she says.
Why it’s harder in the gig economy, without a full-time job
Scott Malcolm has been a financial planner for more than 20 years.
“The trouble with self-employed [people] or those in the gig economy,” he says, “is that banks often see them as ‘more complex,’ as they can’t just grab a payslip and assess regular income.
“[In these cases] banks will often need a few years of tax return history and also then tax reporting, such as BAS statements, so they can try to fit it into their business rules for lending.”
Melanie says although she continually earned about $90,000 per year, the banks viewed her contract teaching work as insecure. So she worked a permanent part-time job in marketing, on top of her teaching.
“I held onto it because it was the job that made me look better on paper … [although] it was not in what I wanted to be doing,” she says.
Mr Malcolm believes the Royal Commission into the Banking and Financial Services sectors has made things harder too.
“The rules are now much stricter,” he says.
“Banks can’t give out loans as easily. They need to dot a lot more i’s and cross a lot more t’s.”
He also says some people applying for loans are finding the process is taking, “much longer than usual … due to historically low interest rates and record number of loan applications being submitted to lenders”.
“In this current environment, lending assessment teams are under pressure and therefore if a loan is missing any documents that are required, the application just goes to the bottom of the pile.”
Focus on risk assessment makes it harder with less secure income
Melanie also says that she found the process sexist.
Mortgage brokers, real estate agents and banks constantly told her: “Oh, but when you get married, you could do this … Why don’t you leave it three or four years and just see if you could have a double income?”
Mr Malcolm says that the system is not designed to be sexist, but it is “created around ‘risk assessment’ and income security is not weighted towards single people or those in the gig economies”.
Therefore, this process ends up being weighted against not just those in the gig economy but also women, because they are far more likely to have insecure income.
Melanie, who is Indigenous, says the bank systems are also disadvantageous to Indigenous people.
“I think about the hurdles I had to jump through, and how traumatic the experience of dealing with the banks was for me,” she says.
“It’s little wonder the dream of owning a home is inaccessible to many others.”
What Melanie did to own her home
Melanie says having a house of her own was about more than just an investment. It was about making a home for herself.
“I have always wanted to buy my own home … and have a space for everything in my house and have my own things around me,” she says.
“I’m really into vintage and retro stuff, so I wanted to decorate the way I wanted to decorate.
“I decided I would try and show the bank that actually I could live, pay all of my bills, and expenses that included my rent, my power, my private health insurance, all of those things off that one permanent part-time job.”
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