Otto Dargan from our friends at the Home Loan Experts answers your questions.

The highest paid and most sought after employees in the modern workplace are now often employed as contractors through specialist recruitment or management firms such as Contract1. Yet many banks still see contractors as a higher risk, why?

Banks have long memories, and are often slow to update their lending guidelines even though the employment market has changed. Because of this many lenders fail to recognise the stability and high incomes of contractors, they only see risk. In the past contractors did represent a higher risk to the bank however in modern times this is often not the case

Unfortunately the majority of lenders assess loans just based on their guidelines, not taking common sense or any mitigating factors such as employment history into account. So how can a contractor get approval for a home loan?

How long do I need to be a contractor to get a loan?

The general rule most financiers in Australia have is that you must have been in the one contract job for a minimum of 6 months if you are a PAYG contractor, or a minimum of 2 years if you are contracting as a sole trader with an ABN.

Are there exceptions? Yes! It is possible to borrow if you have been just 1 day in your job! The conditions are that you must be able to prove that you have been in the same line of work for some time or at least studying in the same field in which you are employed, you must have a clear credit history and ideally you should have saved a small deposit.

What if my bank doesn't lend to contractors?

If your bank declines your loan because you are employed on a contract then talk to a specialist mortgage broker such as the Home Loan Experts and they can arrange a contractor home loan for you. Remember, half the battle is already won if you apply for a loan from a lender that sees contract employees in a favourable light.

How much can I borrow?

You should be able to borrow up to 90% of the property value, and in some cases up to 95% if you are considered by the banks to be a strong applicant. If you have a guarantor to support your application then you may be able to borrow up to 100% of the purchase price and avoid paying expensive lenders mortgage insurance.