Home loans for tradies

By   |   Verified by David Boyd   |   Updated 10th November 2021

Home loans for tradies
  • Tradies in Australia can get a home loan, but preparing the documentation and saving up for a bigger home loan deposit will help get approval with better loan terms.
  • Due to fluctuations in income, tradies face different home loan criteria than those in permanent, salaried jobs.
  • Self-employed tradies who are new to their trade or business and are unable to give business and tax information for two years can still go for low doc loans from flexible lenders who are aware of these limitations.

Being a tradie in Australia can be lucrative. A 2019 survey of more than 600 tradies showed that the average wage across all trade types was $90,246.55 per year, about $5,000 over the national average wage of $85,000 (ABS, May 2019). According to the survey, four out of 10 tradies earned less than $100,000 a year, with three out of 10 earning between $50,000 to $80,000. Around one in 10 (9%) earned more than $200,000 annually.

Some trades did experience a decline during 2020 as a result of lockdowns but data shows a healthy recovery. Going forward, there are bright prospects for tradies.

There are plenty of positives associated with being a tradie but issues can arise with home loan approval, particularly if you’re self-employed. Other challenges can arise if you’re new to the trade and have little to no proof of past income over a two-year period or have changed your place of work or residence recently.

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Can you get a home loan if you’re a tradie?

Yes, you can. The criteria applicable to tradie home loans vary from lender to lender. A tradie’s fluctuating income often proves to be a sticking point when it comes to home loan approval. Tradies can be self-employed, under contract or freelance, or casual, part-time, or permanent employees.

Lenders are gradually coming to realise the varying nature of a tradie’s employment so they’re becoming more flexible, in particular when assessing the eligibility of tradies who experience seasonal fluctuations and those who are not in a position to provide proof of income.

Qualified and skilled tradies

The highest paid tradies in Australia include construction site managers, boilermakers, electricians and plumbers. They typically earn more than the average wage.

Job titleAverage wage
Air-conditioning technician$107,000
Earthworks contractor$77,000
Flooring tradesman$100,000
Machine worker$59,580
Roofing contractor$80,000

Tradies on a company payroll vs self-employed tradies

If you are employed as a tradie on a company payroll, you will have little trouble getting a home loan. Your loan application will be treated and processed as that of any salaried employee since you will be able to produce proof of a regular income.

Tradies who are self-employed, new to a trade or work on a part-time or contract basis can find the home loan application process more challenging when it comes to providing proof of income. They will face relatively strict loan assessment criteria compared to the company employed tradies, but this doesn’t mean home loan options are not available to them.

Home loan options for tradies

Typically, lenders assess a tradie’s eligibility for a home loan by asking three questions:

  • Have you got enough assets to cover the deposit and closing costs of the home loan?
  • Do you have a steady source of income to make regular repayments?
  • What options does the lender have to cover their losses if you default, that is, you’re unable to repay the loan?

The entire credit policy and home loan assessment criteria are centered on getting answers to these questions. That is why tradies, typically, have to face a more rigorous loan assessment process than employees on a company payroll.

Types of home loans for tradies

Home loan options vary according to your terms of employment, years of experience, and ability to give proof of income.

  • Standard home loans. Tradies can apply and qualify for standard home loans as long as they are able to supply the documentation requested by lenders, including proof of income.
    • If on a company payroll, the process becomes simpler and they can easily qualify for a home loan.
    • If a casual or part-time employee, or freelance. Tradies that fall into one of these categories may find it difficult to give proof of income or assurance of capacity for loan repayment.
  • Low doc home loan options are an option for tradies who cannot provide all the proof, but can self-verify their income. Some tradies may be new in their line of work and do not have past incomes to show. Others may have changed their place of work or residence, both of which are seen by lenders as signs of instability. Others may have been in business but have not been doing well, in which case lenders are likely to be wary of approving home loans.

How tradies can prepare for home loan applications

Have the following documentation ready before applying for a home loan.

  • Employment details. Lenders will ask for your terms of employment and proof of income.
  • Savings and credit. What are your savings? Do you have outstanding loans? You will need to disclose all loans including car or personal loans, previous home loans, credit cards balances and other obligations.
  • Assets you own. This can include real estate holdings, motor vehicles and any investments, as well as superannuation.
  • Home loan deposit. You will need to provide the standard 20% home loan deposit if you are on a company payroll. You will be asked for a bigger deposit if you are not on a payroll, that is self-employed, freelance or in part-time employment.
  • Business information and tax returns. What is asked for may vary significantly from lender to lender. Typically, expect to provide:
    • Business accounts. Be prepared to provide financial statements - profit and loss statements, balance sheets and cashflows - for at least the last two years.
    • Tax returns. You may be asked for the past two years of personal tax returns and company tax returns.
  • Extra documentation and proof. Self-employed tradies will be asked for the following:
    • ABN dates and details
    • BAS dates and details
    • GST registration
When 20% deposit is just too much

Hot tip

When 20% deposit is just too much

If you’re prepared to pay for lenders mortgage insurance (LMI), some lenders will approve you with as little as a 5% deposit.

Applying as a self-employed tradie

Self-employed tradies can expect lenders to ask for at least two to three years of business accounts, although some may settle for one year. What matters is that your documents can show that you have been earning a steady income, even though there are variations in monthly earnings. Lenders will want to see that you are in a well-paying trade and can expect business and earnings growth. Presenting accurate records will go a long way towards proving that you are able to service the home loan with ease.

Common challenges for tradies when applying for home loans

  • Lower loan-to-value ratio (LVR), so higher deposit needed. This limits the amount you can borrow compared to the amount you can deposit. Saving up for a bigger deposit is one solution.
  • Higher interest than normal. Lenders often put tradies in the same basket of irregular and fluctuating incomes, factors that increase risk for lenders. Advise lenders if you are on a salary, and they are more likely to offer you better rates. Shop around for lenders with the best interest rates and compare those against other terms to ensure you get a good deal.
  • More likely to be charged lenders mortgage insurance (LMI). Often borrowers who cannot provide a deposit of 20% LVR will have to pay for pricey LMI. Tradies may be asked to pay for LMI not just because of a lower deposit, but because of the perception that their income streams are irregular and fluctuate significantly (which is not the case for all tradies). Increasing the risk that they will be unable to repay the loan. Working with a mortgage broker may help you shop for the best deals in LMI. Some brokers will also negotiate better terms for you.
  • Complication due to self-employed company structure and banks being inflexible. This can be a stumbling block to self-employed tradies. Some lenders may reject you outright. Those who are willing to work with you may be satisfied if you can provide credible proof of income, such as business accounts and taxation records.
  • Fewer lenders willing to work with you. Think of this as a hazard that all self-employed tradies and some professionals face. Some banks and conservative lenders will not want to work with you. You just need to find lenders who are flexible in lending criteria and understand your trade and its seasonal and other patterns.
  • Low doc home loans are expensive. If you are unable to provide the required information, such as two years’ worth of business accounts or tax forms, because you are new to the trade or recently started your business, one option will be low doc loans. But know that they are significantly more expensive than regular home loans. One way to get over this is to save up for a bigger deposit, which can help lower your loan costs.

Need a mortgage broker?

There are many benefits to working with a broker and little downside because they do not charge you a fee for getting your home loan approved. Experienced mortgage brokers can identify the lenders that would be most receptive to working with you, offer you advice on the best options and will help you prepare a strong home loan application, increasing your chances of getting approved. As noted earlier, mortgage brokers will also negotiate on your behalf and get you the best deals.

Talk to a mortgage broker

Ready to buy or refi?

Talk to a mortgage broker