Getting finance in between contracts

I can show years of pretty much continuous work history, lots has been on rolling contracts. I've just finished a role and having a 5 week break before I go back for a 4 month contract with an employer I recently did continuous rolling contracts with for 3.5 yrs. Problem is I want to apply for finance for an smsf property purchase. This should have been sorted before I finished my last contract, but got delayed. Do I have to wait now until I'm physically back in my new contract before I can apply for finance? Also, after previously being advised that the temp contract wouldn't be an issue, I'm now hearing that being new into a 4 month contract may cause a problem getting finance.

 

I'll leave it to the brokers to comment re the finance, but in the interim funds could be stored in a high interest bearer such as a SMSF term deposit. Some of them can be opened easily online.

 

You would need to be gainfully employed before applying for finance.

Are you contracted out via an agency or direct with employers?

Do you invoice the agency / company or get payslips?

 

Quite a few lenders don't have a problem with contractors. Only being in a new job for a month isn't a big deal these days as long as you can show longer term consistency of employment in the same field. You will need to be employed when you apply for the finance however.

If you're contracting via an ABN and issuing invoice, you're considered self employed. Invoices alone aren't enough, lenders will want to see tax returns. In some regards this could work to your advantage because if your tax returns show consistent income over time then you can probably get finance even if you're between jobs. Keep in mind however that at some point you're going to have to make sure you've got a job, those bills don't pay for themselves.

SMSF adds another interesting layer to the problem. In this case the lenders aren't particularly worried about your personal income, they're really looking at the super fund. If you can meet their lending criteria on rental yield alone you may not need to be employed. Sadly though, it's rare for these deals to work just on rental yield.

What lenders do look at to supplement the rental income is your contributions to the super fund. Your employer pays 9.5% of your income if you're PAYG, if you're self employed via an ABN they might go back to your tax returns.


Overall in this case, there's some flexibility if you're contracting via an ABN. If you're PAYG contracting, then you're probably going to need to be employed when you apply for the loan.

 

Thanks, all those replies are a great help.

 

Banks are so bizarre. Employment income is the riskiest form of income. Fire he guy and he fire sells his house.

Anyone who is positively hearing a property is safe. Lose his job he still has income. Getting a job becomes free bonus money.

 

What if rates rise or there are vacancies?

 

I was hoping it could work like that but apparently not.

 

Tight vacancy rates. All long term tenantsn

 

That may be the case now, but what abotu in 6 months time or even 2 years time.

 

If needs be I can sell a house and live on cash plus other rents. The point is that its a few weeks gap between contracts.

 

Look at it from the lender's point of view - they are required by law to lend responsibly.

 

I know. I was just asking the question. Not everyone has a traditional work pattern, or wants one.

 

If you are self employed you might be able to show 2 years tax returns and qualify for finance that way.

 

Thanks Terry. I'm not self employed, just doing holiday cover/short term direct for health service employers. I can hang on a few weeks for finance.

 

Just read of a similar situation on another thread and realised that I have quite a large cash buffer from the sale of a house, plus another house sale gone unconditional and more cash coming next month. So wondering if any of the banks would accept this without me having to wait too long into the next contract to apply for finance?

 

Thanks Peter, do you know if a large cash buffer could make a difference (I'm PAYG)? Happy to wait until I start the role but would be even happier if cash savings could be taken into account and I could apply earlier.

 

Nope.

Cash doesn't help servicing as you still have to demonstrate you can service the loan.

You might be able to use a Low Doc loan though.

 

Thanks Terry, worth a try. I just wondered if having a contract from employer with start date 3rd Oct and cash buffer would suffice.

 

I don't like your chances - but perhaps.