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Finance and Temporary Employment: Contract about to END.

Discussion in 'Property Finance' started by legallyblonde, 22nd Aug, 2016.

  1. legallyblonde

    legallyblonde Well-Known Member

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    Hi all,

    I have read the thread about temp income, but this situation is a bit different.

    Asking for a friend who is wanting to buy an IP but isn't currently looking as their contract is ending next month. The are assuming they cannot borrow money given they may be unemployed this time next month. They are currently on a six month contract with pay in the 60k's (previous one was three months summer contract at lower pay), both with the same organisation in the same team. Obviously they would need to disclose to their bank that their contract is due to end shortly...But I was hoping the amazing brokers here might be able to advise if my friend has a possibility of being eligible for finance? They are in a similar position to myself and have very minimal living expenses (no rent ect).

    Thanks in advance for any thoughts you might have.
     
  2. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I would like your friend to have some employment lined up if they want to consider buying.
     
  3. larrylarry

    larrylarry Well-Known Member

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    the lenders would want to see payslips.
     
  4. Brady

    Brady Well-Known Member

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    What's your friends plan when the contract runs out? Have they had repeat contracts previously? Is it common in the industry they're in? Will a cease in employment impact their ability to repay the loan?
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Brady's asking all the right questions.

    I'd just add - even if she manages to find a bank that's willing to lend she really needs to make a decision as to whether it's a good idea. Personally - I'd want to know that there's a very good chance of the contract being extended and/or a fair bit of savings stashed away for a potential period of unemployment.

    Cheers

    Jamie
     
  6. dabbler

    dabbler Well-Known Member

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    I used to do a lot of shorter term contracts, when one would finish and I hoped for a few weeks/month of down time, but they would send me another (and you know, make hay etc)

    If this is what they do and can show it, then should be able to find a lender.
     
  7. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    If your friend has a decent cash buffer to tide her over in between contracts and has a few years of previous consecutive history then its doable, all other things considered.
     
  8. legallyblonde

    legallyblonde Well-Known Member

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    Cash buffer in place. Property would be interest only so cash flow positive. Friend works in IT which seems to be every second advertised here in Tas atthemoment.
     
  9. albanga

    albanga Well-Known Member

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    @Brady could back this up but I know this situation quite well because it was recently my wife and I's.

    My wife worked for Recuitment company A for a 7 month mat leave assignment. She had payslips and a group certificate showing an annualized pay of $50,000.
    Her assignment finished about 4 weeks into this new financial year and company A didn't have anything suitable so she looked around and was quickly offered a job from Recruitment Company B. The issue here is new company, new payslips so policy would suggest needing 3 months.

    Speaking with CBA they said they "could" accept 1 weeks payslips but a few things would come into play (LVR, employment history such as same industry, length, other applicants if applicable). They would also only take the lower of the group certificate and annualized pay, which does make perfect sense.

    End Result = Wife was offered a perm position 1 day later so CBA one day employment policy makes it a no issue. The new issue is getting my bloody contract finalised (stupid council!)
     
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  10. Azazel

    Azazel Well-Known Member

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    Hehe good stuff.
    It's fun sometimes, seems like pushing poo uphill, then it all works out eventually.
     
  11. albanga

    albanga Well-Known Member

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    haha exactly! When we found out the contract was finishing (she thought it may become a more permanent thing) we immediately went into panic mode!

    We have been working on this build stuff for so long and then had to start thinking about how to make another temp job work.

    She then gets offered an amazing permanent position, closer to home, more pay and plenty of great job perks.
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Valuable lesson for us all I guess

    While we stir around in our tea cup storm, greater opportunities often come to pass, sometimes not as obvious as this one

    ta
    rolf
     
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  13. albanga

    albanga Well-Known Member

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    Exactly!
    It would be astounding to see how many people stay doing something they do not enjoy through fear of the unknown. I will put my hand up and say I have been guilty of this many times before.

    My wife was very upset when she was told the news. They absolutely loved her at the job and she loved working for them and the team. Reality was it was a maternity leave position and whilst the company had hoped to keep her, it simply was not feasible.

    But when one door closes, another opens. She was out of work for a week, applied for 2 jobs and got offered both of them. She took the perm one and is really enjoying it and the team so far.
    Also gives a much needed boost to our servicing :)
     
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  14. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Most likely a few lenders who will finance this deal if they have sufficient cash savings to cover income gap and demonstrate consistent employment history, but ideally your friend is best to be applying for finance with a new contract underway. More options, more peace of mind.
     
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  15. Brady

    Brady Well-Known Member

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    @albanga CBA has actually recently clarrified this employment class and it's quiet favourable.

    Contracted employees are to be treated as PAYG

    A contracted employee is someone who is employed by an employer (generally over a contracted term). They have similar working conditions to PAYG employees ie. full time and part time hours.

    Income and wages paid for duties performed are paid to the employee as a net salary, ie. after tax. They receive the net salary as a regular permanent wage. All income taxes, deductions and superannuation are paid by the employer.

    They have no business running expenses and take no commercial risk for the duties performed within the business. They do not make a profit or loss for work performed.

    Examples of contracted employees would be an individual working on contract in the IT and Finance industries. Contracted employees are to be treated as PAYG.

    Casual and temporary employees are defined as full time or part time workers who are not permanently employed.

    Use one of the following options:

    1. Three months' salary credits to an account

    2. One payslip showing > three months YTD income

    3. One payslip showing < three months YTD income and PAYG payment summary or tax return

    4. Letter from employer or employment agency with current employment/length of employment and break up of YTD income and PAYG payment summary or tax return.

    For options 2 and 3, confirm and evidence of the start date of employment with the borrower if they commenced employment after 1 July for the current financial year.


    Based on this @albanga can see why it was perfectly ok to use 1 payslip with <3months history and the group cert (PAYG summary) from the previous year.
     
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  16. Azazel

    Azazel Well-Known Member

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    That's awesome.
    Hope our dumb luck kicks in with our move back to Brisbane.
     
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  17. legallyblonde

    legallyblonde Well-Known Member

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    To avoid stress they might just wait... better than risking a knockback from thebank

    thank you all
     
  18. Mac Fields

    Mac Fields Well-Known Member

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    They could keep reading and researching markets in the meantime (boring I know :() so when the servicing comes back, they're ready to pounce!
     
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  19. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Very true. Serviceability constraints are a transitional environment, it's always best to consider this as a time to focus on the non-acquisition side of investing, ie a great time to grow in knowledge and skills.
     
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  20. legallyblonde

    legallyblonde Well-Known Member

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    So true! I want them to have borrowing power so I can live vicariously through them until I get an amazingly well paid job hehe.


    UPDATE: The just got another contract extension... Till late November now.