The low-down on the best time to get a home loan

Casual workers who face greater difficulty getting a home loan can boost their chances and borrowing power if they act sooner rather than later, experts say.

Home buyers who work casually, make commissions, receive bonuses or work a lot of overtime in the back end of the year will find it easier to get approved for a mortgage in the coming months, thanks to a quirk in how the approval system works.

Mortgage experts say the way lenders calculate a prospective borrower’s income — based on the year-to-date payments on a payslip — favours those workers who apply early in the year because lenders can double the mid-financial year figure when calculating annual earnings.

Any extra shifts, overtime worked or bonuses can help to boost the figure, which can make getting approved for the loan easier.

Despite the ease of securing finance, buyers will still face significant hurdles – given low listing levels, higher prices and interest rates. Experts have warned that 2024 could be a particularly difficult year for buyers, and buyer sentiment is at one of its weakest levels since the 1980s.

Director at 40 Forty Finance Will Unkles said the quirk provided extra help to casual workers, who typically faced hurdles to get a loan approved.

“A lot of banks when you’re in the second half of the financial year now will just double your year-to-date. That can help people who work casually and have [earned] a lot in the past six months,” Unkles said.

“This six months is the easiest time to get a loan. But when you hit July, August, September, the banks say, ‘Well, you don’t have much history of overtime’ because there’s only been three months of history.”

Foster Ramsay Finance director Chris Foster-Ramsay agreed.

“If you’re a casual, you now have six months of salary history which can help you,” he said. “[The system] works for you from January to June and works somewhat against you from July to December because of the year-to-date calculations.”

There was a flipside though for those who took time off during the holiday season. However, Two Red Shoes founder Rebecca Jarrett-Dalton said taking a reasonable amount of leave — no more than four weeks — could minimise the risk.

“You have to take it, it’s not necessarily bad. Most lenders will annualise your year-to-date income and you will take that over the 48 weeks to allow for annual leave.

“So it can be good and bad for casuals. If you didn’t take a big chunk of leave, you’re in a good position.”

Christmas and holiday-related spending could also affect the ability of workers to get a loan, Jarrett-Dalton said, but it was important to be clear that it was directly related to the holiday period when speaking to lenders.

“December and January are not normal,” she said. “If you have to give them three months of living expenses right now, it’s not ideal.”

RateCity research director Sally Tindall said it was important that the averaging system was used carefully and not to overinflate borrowing capacity. Lenders can also apply similar techniques to workers who earn commissions or bonuses.

“They might take a look at the last two bonuses and take into account the lesser of the two or an average. They want to make sure you’re taking on more debt than you can handle.”

Jarrett-Dalton agreed: “The point is not to get more money than you can afford but [the quirks in the system are] not going to hurt you either.”