PAYG contract - refinancing

Discussion in 'Loans & Mortgage Brokers' started by kacheek, 9th Aug, 2023.

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  1. kacheek

    kacheek Well-Known Member

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    Hi all,

    I have been self-employed for the past few years, and my Pty Ltd income for the last financial year wasn't very high due to taking a long personal break. I'd like to refinance my properties but serviceability will not be enough.

    I'm about to start a new PAYG contract in September at a very high rate ($1000+ per day, so equivalent to well over $200k full time). The contract will be an initial 3 months with extremely likely extension.

    I'd like to refinance my properties as soon as I start this PAYG contract, but do you know if lenders will want to see me in the role for a good few months before I can refinance using the serviceability that comes with this high PAYG income?

    If so, how long will I need to be in the role before I can apply for refinance? And is the short duration of the contract (3 months) going to be an issue?

    Thanks so much for your help in advance.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    It might be possible with the first months payslips and a copy of the employment contract, but it would be touch and go.

    There are some lenders that would be okay with it after 3 months, but you'd need to show the contract renewal by then.

    The majority of lenders want to see contractors in the same role for at least 6 months with a renewal beyond 6 months. If you are changing roles frequently they want to see continous employment over 2 years.
     
  3. David Han

    David Han Mortgage Lending Specialist Business Member

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    With your PAYG contract - will you be getting annual leave and sick leave? If so, CBA has one of the best policy where they will treat you the same as a FT or PT PAYG - so you just need one payslip for income verification.

    If your PAYG contract does not come with annual leave or sick leave - then you will be classified the same as a casual/temporary role - and you will need a minimum of 6 months in the role or 6 months in the same industry. CBA also has one of the best casual employee policy as they won't shade the income to 46 to 48 weeks unlike other lenders. However in this scenario, where you have not been in the role for at least 6 months they will revert to using the lower of your annualised payslip and your Income statement or Tax return from FY2022.
     
  4. kacheek

    kacheek Well-Known Member

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    Hey Peter,

    That's very good news to hear that some lenders would be ok with it after 3 months...does this include day rate contracts with no annual leave and sick leave? Which lenders have they been from your experience? Are they non tier 1 lenders?
     
  5. kacheek

    kacheek Well-Known Member

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    No annual leave and sick leave in the contract...although I have asked them if they can change the arrangement. In your experience, would a 3 month fixed term contract with annual leave and sick leave be ok with CBA?
     
  6. David Han

    David Han Mortgage Lending Specialist Business Member

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    With CBA - if you get annual leave and sick leave - they treat it with the same policy as FT or PT PAYG so they don't have a requirement on how long you have been in the role or how long you have remaining on the contract.
     
  7. kacheek

    kacheek Well-Known Member

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    That is amazing David thank you. I'll see if I can get them to issue me a contract like this instead.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    If they're quoting a daily rate then this is unlikely. Contracts with high daily rates usually come instead of sick leave and all the other stuff.

    People have different definitions of what tier 1, 2 & 3 lenders are.

    CBA (tier 1) can use 3 months of salary credits to verify income, as can a number of others smaller banks (which I define as tier 2). This can give you an opening but the decision may still be made on a case by case basis.

    For real certainty you need to be in the role for > 6 months.
     
  9. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    No annual leave is basically the same as casual so its generally 6 months required. If you had been with another PAYG contract / employer beofre this then you could find a solution from day 1 using the past income for servicing and the contract to show that income is sustaibale. However as you were SE before this then I think you will need to wait at least 3 months possibly the full 6.
     
  10. Lindsay_W

    Lindsay_W Well-Known Member

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    When you say last financial year do you mean July 2022 - June 2023?
    If so, how was your 2022 financial year income?
    Plenty of lenders will take 2022 FY income in isolation.

    Is this your assumption or have you had a decent Broker run a serviceability assessment for you?
     
  11. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    Daily rate will most likely be treated like casual worker.

    Will need to be in the role for 6 months.