Yes, it is possible for a part-time worker to land a home loan. But even in these more enlightened times of flexible employment arrangements, it isn’t as easy as you might hope for Australians working part time to get the deal they want from a mortgage lender.
While unemployment rates in Australia have been comparatively low for some time, research shows the way we are working has changed significantly over the past three decades.
According to Australian Bureau of Statistics and Reserve Bank data, about one in three employed Australians work part time (less than 35 hours a week). In 1967, the number of Australians working part time was less than one in 10.
More than half of Australia’s part-time workers today are casual employees. This compares with just 10% of full-time workers who are considered “casuals”. In fact, Australia has one of the highest shares of employees engaged in part-time work across all developed countries.
More Australians are working less hours through choice (perhaps because they are also studying). Others work part time because they are unable to find full-time employment. But the result is that more people are unable to rely on a full-time salary as proof of their financial stability when they want to borrow for any purpose, especially to buy a home.
The problem, of course, is that home-loan lenders tend to see those who work part time as risky borrowers. Even if you have good reasons for working part time, many lenders will be wary.
This can make it difficult for those in part-time employment to get the kind of home loan they might want. It might even be tricky to get a home loan at all.
Why is it so hard for part-time workers to get a home loan?
It shouldn’t surprise you that most lenders favour applicants who have a full-time job. It shows them that the borrower has a certain level of commitment to a company and industry, and suggests a greater amount of current (and future) stability and financial certainty.
Home loans are typically taken over a term of 25 or 30 years. Lenders will want to feel a degree of comfort that borrowers have the capacity to pay it off through making full and regular payments. For lenders, people in full-time employment look like a safer bet (in theory anyway) than those who are working part time or are in a casual role.
It can be difficult for those who aren’t holding down a full-time job to qualify for a home loan under the “usual” lending criteria. Even proving how much you earn can be tricky, let alone providing all the necessary documentation, and showing that you are able to repay the loan.
The same applies to anyone who doesn’t do “traditional” work … perhaps those who are self-employed or on contract, or those who work for an agency or service business. (See here for advice on how to get a home loan if you’re self-employed.)
But that doesn’t mean that you can’t get a home loan if you’re engaged in part-time work. At the very least, most lenders will want to see that you have held the part-time job for a long time. Many will also need to know, for instance, if you work part time while having a full-time role.
As times have changed – and as more Australians take advantage of more flexible workplace arrangements – so have financial institutions’ old-fashioned attitudes. Some lenders now understand why you might choose to work part time, and are prepared to discuss how they can shape a loan that suits your circumstances. They will examine your lifestyle and respect your decision. It’s through such lenders that you have a greater chance of securing a home loan.
Do home loan lenders accept all of your part-time income?
Part-time workers certainly have a tougher job convincing lenders that they are suitable loan candidates than full-timers. For starters, most lenders will expect you to prove that you have held your part-time job for at least 12 months.
Even though it varies between lenders, most will need to see your tax returns or group certificates for the previous two years as well as substantial proof of income, which is usually two recent payslips.
But what makes it especially tough is that some lenders assessing your application will only consider half of the income from your part-time role. Others will use your full income as a guide. Generally, major banks have tougher criteria than specialist lenders.
These stipulations on part-time workers can make it difficult to prove that you’re earning enough money to meet the repayments on a home loan. It can also limit the number of home-loan products that are available to you.
Does increasing your work hours help as a part-time worker?
Yes. Getting more hours from your employer can often help you find a lender that is prepared to give you a larger home loan. Depending on your situations, you might also need to consider trying to find a full-time job if your mortgage options don’t meet your expectations.
Even if you’re able to get more work, lenders are likely to wait up to six months to see how committed you are to your new circumstances. They will want to know that your revised work patterns and new income levels are stable and sustainable. Whatever happens, you will need to provide further proof of income and a letter from your employer.
How else can I improve my chances of getting a home loan?
As a part-time worker, there are a few things you might be able to do to improve your odds of landing the right home loan:
- Ensure your financial affairs are in good order. You should try to slice the amount of money you owe on any personal loans and credit cards before you apply for a loan. You might also consider working with your prospective lender to consolidate these debts into your home loan at a lower interest rate, although you will still want to try to pay off these personal debts as quickly as you can.
- Ensure your credit rating is good. You can request a copy of your credit file to see what lenders will see when they assess your application. See here for more information on how to find your credit score.
- Speak to one of our experts, who will be able to find a specialist lender for a loan that aligns with your needs.
What to do next
Before making any decisions, you should talk to one of our experts. All of them will help you understand what you need to do and offer the best chance to find the home loan that suits you best. With the help of an expert, you can make the right choice for your situation.
Please note that the information in this article is general in nature.