The short answer is yes – casual construction workers can get a home loan in Australia.
While not all financial institutions give casual workers home loans, you can usually qualify for a home loan as long as you meet specific criteria.
Australia had 2.4 million casual employees as of May 2021, which highlights how common casual work is. It is partly for this reason that the Australian Fair work Act guarantees casual workers leave and pay entitlements.
And although the act does not mention loan entitlements, some lenders give Australian casual workers a home loan.
Here we take a look at the criteria and procedures you can use to get a home loan as a casual worker in Australia.
*Note this article does not constitute legal or financial advice.
Australian Casual Workers Can Get Home Loans
Australian lenders require proof of income before getting a home loan. Essentially, if employed, you must prove to your lender that you’ve been working for your current employer for at least a year, and you must show proof of income flow.
However, the definition of casual work complicates this, since you are a casual worker if:
- You have no advanced commitment to work for your employer
- Your employer is aware that you’re not committed to work with them
- Your weekly or monthly working hours vary
- You have no paid holidays or paid sick leaves
- Your employer can fire you without notice
- You can quit your work without notice
Fortunately, different lenders have unique qualifications for casual workers home loans. Meaning some lenders can approve your application without proof you’ve been working for a year with constant income.
These lenders will typically charge you a higher interest rate to compensate for the increased lending risk casuals pose.
What Other Criteria Do Lenders Consider?
Lenders must confirm that your income is stable before giving you a home loan. Essentially, they are looking for evidence that your future income will be stable enough that you will be able regularly service your home loan repayments – at a low risk of default.
Part of this is your credit score. You also need a good credit score for casual workers to be granted a home loan. Your future lender’s verification of your loan-worthiness involves compiling your credit reports.
Paying your loans on time boosts your credit score. So, if you have a history of missed credit card payments, or other loan payments that you have missed, it will be that much harder to be approved.
In addition, if you are high risk, you must provide the lender with a guarantor, and you will need an appropriate deposit to qualify for a home loan.
You can reduce your risk with a larger deposit as these reduce the lender’s risk. (As a bonus they’ll also save you money – the greater your deposit the less money you’ll borrow.)
Consequently, you’ll pay a lower interest rate. Fortunately, most Australian lenders can give casual workers a home loan when they deposit at least 20% of the total amount.
With this deposit, you’ll escape paying the lender’s mortgage insurance.
How Much Can A Casual Worker Borrow?
Typically, a casual worker can borrow up to 90% of a property’s value if they meet a bank’s standard guidelines. If you have been with the same employer for over six months, and you have a strong financial position – meaning little debt, a good savings record and a good deposit – you may qualify for a 95% home loan.
And with a guarantor, you may be able to borrow up to 105% of the property’s value.
Use a mortgage calculator to check how much you can borrow based on your average income.
First Home Loan Deposit Scheme
If you are looking to buy your first home, and you have less than a 20% deposit, you may also be eligible for assistance from the First Home Loan Deposit Scheme.
This is a federal scheme that reduces the risk for banks to lend to people with smaller deposits. It is only available for first home buyers buying a residential property from a participating lender.
Characteristics of Casual Worker Home Loans.
All lenders charge casual workers higher interests and fees to offset their risk:
High Interest Rates
Australia has specialist lenders who specifically lend to casual workers. These specialist lenders take advantage of their willingness to risk. Hence, they charge you higher interest rates.
Banks and lenders typically have a limited proportion of high risk loans they are able to make as part of their total loan portfolio. You may need to search around to find a lender with slots available, or you can approach a mortgage broker – a quick search in your local area will uncover a range of choices.
High Loan Fees
It is common for banks to charge casual workers extra loan fees for home loans. These can include annual or ongoing monthly fees and charges.
So, when you are comparing loan offers, make sure to include these extra costs as well as the cost of servicing the loan interest rate.
Prepare To Apply For A Home Loan
Once you’ve confirmed you meet the criteria for getting a home loan, you should plan your application.
#1 Gather Relevant Documentation
ost importantly, you will need proof of income.
At a minimum, ensure you have:
- Proof of working in the same industry for twelve months or more
- 12 consecutive months of bank statements
- Your tax return with ATO Notice of Assessment
- A contract
You could also benefit from a letter from your employer stating how long you have been employed.
The more information you can provide to show your stability and income consistency, the more likely you will be able to get better mortgage terms.
#2 Approach Lenders or Get a Broker
The larger national banks all have details for applying for a mortgage if you are a casual construction worker.
Alternatively, consider getting a mortgage broker. They will shop around and try to get you the best deal they can. However, many have pre-existing relationships with specific lenders, so do your homework – you do not want to get locked into a deal and then realise that you could have got the same mortgage at a lower rate.
Buying a home and getting a mortgage is for most people the largest financial decision they ever make. It is even more challenging for people with a less stable income.
So, make sure you’ve all your ducks in a row before you start. If you are thinking about getting a mortgage in the future, this is an excellent time to get your finances in order. Eliminate and consolidate debt and start a savings plan.
Finally, also consider whether buying a home is even the best option. The costs involved in owning a home – from insurance, repairs & maintenance and council rates – often surprises first home owners! Renting (at least for now) may make the most financial sense.
Whatever you decide to do, you will need the most consistent income you can get – and of course – you’ll need to earn as much as you can.
This is where Dragon Worker comes in.
We pay the highest rates for casual construction workers in the industry (26.5% above the award rate), and we make it easier for you to control when, where and how often you work – making it easier for you to generate the steady income that banks are looking for.