If you’re a contractor (or about to become one), timing matters when it comes to getting a mortgage.

A lot of people move into contracting because the pay is better.

On paper, your income goes up — but from a bank’s point of view, it’s not that simple.

For assessment purposes, contractors are often treated very similarly to casual employees:

• You only get paid when you work
• There’s no annual or sick leave

Because of this, banks tend to assess contractor income more conservatively.

Depending on the lender, they might:

• Want to see you in your current contract for at least 6 months
• Annualise your year-to-date income
• Look at your most recent 6 months, then assume you only work 46–48 weeks a year

Some lenders are more contractor-friendly, but your options can still narrow — especially if you have other loans or commitments.

Why timing makes a big difference

One thing many people don’t realise is when you move into contracting can affect your borrowing power.

From experience, switching around the end or start of a financial year often works better.

If you start contracting in October, and a lender annualises your income after 6 months, your income can look lower than it really is — simply because you didn’t work July to September in that role.

Your income hasn’t dropped, but on paper, it looks like it has.

That can lead to:

• Lower borrowing power
• Fewer lender options
• A loan outcome that doesn’t truly reflect your real situation

Bottom line

If you’re thinking about becoming a contractor and may buy or refinance in the next 6–12 months, it’s worth having a chat before making the switch.