The amended Recommendation S requires banks from next year to look more kindly at mortgage borrowers who earn income based on the so-called junk contracts.
It turns out that the devil is not as bad as it is painted – banks are already lending to such people, although they check their creditworthiness a little more restrictively.
The case may concern even half of the borrowers – according to a survey conducted by the Pennypress site portal *, among those paying back or planning to pay back a mortgage as much as 51% in the near future. earns income from sources other than an indefinite employment contract.
The topic of “junk contracts” has been present in the media for several months, especially in the statements of politicians. Perhaps this media buzz prompted the Polish Financial Supervision Authority to include a provision in the text of the amended Recommendation S giving banks a green light on granting mortgage loans to people with irregular income: “For retail clients who have irregular or unstable income, creditworthiness assessment should lead to an assessment regular servicing and repayment possibilities. If the assessment is positive, the bank may grant credit to such clients despite the irregularity or instability of their income. “
Contracts for specific work and mandate contracts
This does not mean, however, that until now non-working people have always had to leave the bank window with a ticket. In general, banks want not only the highest income of borrowers, but above all its relative stability. Banks accept mandate or specific work contracts as a source of income, although those earning money in this way must meet criteria other than full-time employees. First of all, it is necessary to document employment on a commission or work contract for a minimum of 12 months. It is necessary to demonstrate the continuity of the execution of orders in the analyzed period. Of course, small, e.g. monthly breaks are allowed, but in the bank’s assessment the situation must be stable. A longer period of earning income is just one of the differences between a full-time job and a “junk contract”. Another difference is the method of determining net income and the different approach in this matter in each bank. Some institutions will take into account statutory 20- or 50-percent tax deductible costs for determining this income, which in practice means that the amount accepted for analysis will sometimes be much lower than the amount actually paid or transferred to the account. Other banks also apply their correction factors assuming that net income is no more than e.g. 80 percent. account receipts.
Earning, therefore, on the mandate contract or contract for specific work should be particularly closely compare the offers of banks and their procedural requirements. It may turn out that for the same situation the difference in creditworthiness can reach up to several dozen percent – says Michael Krane, Chief Credit Analyst Captain Queel.
Contract of employment on specified time
Borrowers employed on fixed-term employment contracts, also referred to as temporary contracts, are in a slightly better position.
– All banks set similar terms for potential borrowers – their temporary agreement cannot be in force for a short period of time or expire soon after the loan application is submitted. Most often, you must provide the bank with proof of employment for at least half a year with the employer and a temporary employment contract signed by him for at least six months, although in some cases the bank may require up to 12 months. Sometimes a bank may ask a potential borrower to provide a promise of employment, i.e. a document in which the employer undertakes to employ an employee after the end of the current contract – says Katarina Cuppil, president of the management board of Nowy Adres SA, the owner of the Pennypress site portal.
Economic activity as self-employed
The situation is different in the case of persons conducting business activity on the basis of the so-called self-employment. In this situation, borrowers are treated like any other entrepreneur and creditworthiness is calculated in the same way. The first criterion is the period of running a business. The absolute minimum is 12 months, although there are banks that require up to 2 years from registering a business. This is because very many sole proprietorships cannot stand the test of ending the two-year period of preferential ZUS contributions for people starting such activities. Deviations from these requirements are sometimes possible, most often when the activity is a direct continuation of an earlier position. If the nature of the activity performed has not changed, then some institutions may recognize a shorter period of business activity, especially if we present a signed cooperation agreement or contract.
In the case of self-employment, it is also worth remembering the differences in determining income. The amount of taxable income will be taken for analysis, thus including tax deductible costs. It is worth remembering this and not only suggesting the amount of revenue guaranteed by the cooperation agreement or the signed contract.
Lack of employment does not mean disqualification
Contracts for work, work or self-employment in the form of economic activity are sources assessed differently than the employment contract. However, despite the increased requirements for seniority and other calculation of net income, banks do not make major problems in crediting such clients. The situation in this area has not changed for many years and this is due to the popularization of such forms of employment – sums up Michael Krane.
Many banks do not divide clients into full-time and other clients at all, assuming that it is not the full-time job that is important, but the entrepreneurship of the employee, his mobility and ability to change clothes. However, you can still find institutions that treat work under an indefinite contract as a sine qua non condition when granting a mortgage, although the labor law in our country allows you to dismiss such people practically overnight. When meeting a refusal in one bank, do not be discouraged, just try somewhere else – adds Katarina Cuppil from Pennypress site.