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Casual vs Full Time on Serviceability Assessment

Discussion in 'Property Finance' started by drg86, 13th Oct, 2016.

  1. drg86

    drg86 Well-Known Member

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    When a lender assesses you for serviceability is there any difference between being employed casual as opposed to full time if the annual wage is exactly the same?

    I can understand it looks better being full time, but is there actually a difference in their calculators?

    I'm considering approaching my employer to negotiate a new contract and want to know if I should request a specific employment type.

    Thanks
     
  2. Redom

    Redom Mortgage Broker Business Member

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    Lender policy will be different and application of income may be different.

    E.g. some lenders won't accept new casual arrangements, some will relatively quickly (3 months), some will verify via banking credits over a 3 month period, some will use YTD.

    Therefore there's more uncertainty/flexibility associated with what the actual income figure is for casuals - and it will be different between lenders. This is both an opportunity (with some calculators) and a cost (with most).

    Once the figure is inserted into a calculator, its treated as salary. Generally, salary is included in the same way its from a full time or casual source.
     
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  3. tobe

    tobe Well-Known Member

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    Some lenders annualised casual over 48 weeks instead of 52, as casuals don't get holidays. This can have a big impact on capacity.
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    There's a number of quirks out there. Tobe's example is a good one. Another is they'll often use the lower of your current income (based on the year to date figure on your payslip) and the last PAYG summary figures. Either way the assessment is going to be more conservative.
     
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  5. Sonamic

    Sonamic Well-Known Member

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    I did 4 loans last year as a Casual. I'm employed in the same industry I've been in for 20 years. So that was a plus for me. Have switched back to full time now though. And I should add it was just prior to APRA changes.
     
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  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Casual isn't a big deal overall, there's plenty of lenders that recognise that the workforce is becoming more casual and most are fairly accepting of it. The income can be more variable however, so lenders have various methods of taking this into consideration when they assess affordability.
     
  7. drg86

    drg86 Well-Known Member

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    Thanks all. I have been able to get most of my loans as a casual, I think for one of them I was PPT. Being in the same industry for 8 years and on a high level in management has probably helped but I just wasn't sure if the casual status was hurting my lending.
     
  8. Sonamic

    Sonamic Well-Known Member

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    Exactly Peter. Workforce is becoming more casual based. End of day Capacity To Repay is what they worry about most?
     
  9. tobe

    tobe Well-Known Member

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    Casuals get a higher hourly rate to account for the lack of sick leave and holiday pay. A few lenders remember this and account for it when assessing capacity. Many don't, but it's worthwhile remembering.
     
  10. charpj

    charpj Well-Known Member

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    Casual is assessed different among lenders, they want to ensure consistent hours. Producing a group summary from last year and a YTD payslip, will give credit assurance around the consistency of income.

    Banks do understand that having a full time contract in Australia is becoming, rare as hens teeth.
     
  11. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Lenders will look at continuity of employment which is bank speak for previous employment history and whether the current position is similar to previous positions as this gives comfort that you have the necessary skill set to remain employed.

    Also most will want 6 months casual employment history and some will want 12 months + but as mentioned there are exceptions.
     
  12. Arnoldus

    Arnoldus Active Member

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    Had a few loans approved through CBA working as a casual/contractor. They took an average of the last 3 months earnings. Quick to approve each time (3-5 days). Not sure if they're harder to deal with if you're pushing serviceability limits, but didn't notice anything else different to when I worked a permanent position.