Why is it that without that regular 9-5 paycheck coming in, lenders tend to put up hurdles? Tradies keep the construction and home renovation industries rolling, but when it comes to getting a loan – especially a home loan – tradies can find it hard to get a decent deal and often end up jumping through more hoops than salaried employees. 

So what’s the deal?

You’re doing it for yourself

A lot of tradies tend to be self-employed. This makes banks cautious.

Even though many tradies run very successful and financially sound businesses, lenders might often see your income as too irregular. It may be a myth that ‘self-employed = high risk’ but banks are still going to be extra careful to protect themselves from any risk that they might not get their money back.

One of the main reasons tradies get a harder road to a home loan is cash flow. Tradies are less likely to get a regular paycheck like those on a salary. Project-based work makes the cash flow hard to predict and lenders get nervous about whether you can make any repayments during slow periods.

Another challenge is that you might be new to a business or just starting out on a business or income stream. This might mean that you have limited financial history, even though you are currently secure. You might also have had to work hard to get the business up and running and have some less secure financial times behind you, or have a lower credit rating than you might like. These are all part and parcel of being a self-employed tradie but they can have implications for a loan the size of a house mortgage.

So what does all this mean? It means you’ve got to prove to the lender that you are financially stable. It’s a bit of a headache and it’s definitely time consuming but you will need to get a lot of documents ready to show that you are in a financially healthy position. This can include tax returns, invoices and sometimes even future contracts to show that you are a safe bet.

Application Tips for Tradies

1. Get (and keep) Your Docs in a Row:

Seriously, treat your financial docs like gold. Update your tax, keep a trail of your jobs, contracts, invoices, you name it. Detailed records will prove your income and shine a spotlight on the steady demand for your work.

2. Consult a mortgage broker:

Mortgage brokers are your wingmen in the loan game. They know the ins and outs of the financial products that might help your application and they know which lenders are tradie-friendly. With your details, they can advise you on how best to present your finances to a lender and, the best part is, their advice is usually free.

3. Look past the big banks:

Alternative lenders might be the answer for the more unique situation tradies can find themselves in. Smaller financial institutions and non-bank lenders may be more willing to consider your application than the big banks. They might be more flexible about evidence of income and have fewer hoops to jump through in their assessment process.

4. Even things out:

If you can, try to even out the peaks and valleys of your income. Lenders will be more accommodating if they can see that you keep a buffer in your accounts and work to maintain a steady cash flow via contracts or ongoing client relationships.

The Wrap Up

So, yeah, it’s a bit more complex for tradies to get their hands on a loan compared to someone who is not self-employed and takes in a regular salary, given lenders’ cautions around self-employment and what goes with it. But it’s not all doom and gloom. It’s clear once you understand why lenders are being careful that with a bit of preparation, tradies can improve their chances of a successful application.

If you open up your research to non-traditional lenders, you’ll find a large number of lenders like TradieLoans, who specialise in dealing with your circumstances, day in, day out.

The key is to demonstrate financial stability and reliability – show them that, despite the ups and downs of your work, you’re as reliable as they come.

As any good tradie knows, you’ve got to put in the work to see the results.