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Income from a mortgage employment contract

When applying for a mortgage, the most common source of income is an employment contract. It is often said that this is a favorite income among banks and there is a lot of truth in it.

However, does the contract have to be concluded for an indefinite period or is it just a myth. What if the salary is paid in cash? I will introduce the topic of banks’ approach to this form of employment.

Contract of employment on specified time

Contract of employment on specified time

The employment contract is one of the banks’ favorite incomes. A frequently repeated myth is that it must be for an indefinite period, otherwise banks will not grant loans. However, the truth is different.

To get a loan, you should meet the following requirements:

  1. employment contract for a minimum of 3 months,
  2. contract validity minimum 6 months ahead,
  3. internship – banks verify employment continuity. It may be that you have worked for a new employer for one month and you will still get a loan. It is important that there is no gap between moving from one job to another.

It is best if the contract is from a minimum of 6 months and more than 12 months ahead. Then there will be no problems obtaining a loan in most banks.

Promise

Some institutions will treat your contract as if it were for an indefinite period, if you have temporary employment, but you will present the so-called promise.

The promise is not in advance, so the employer can formulate it in his own words.

Example:
The employee Jan Nowak is currently employed under a fixed-term employment contract until December 31, 2019. At present, I do not see any contraindications to continue cooperation after this period on not worse conditions than at present.

or:
The contract of Mrs. Maria Kowalska is currently in force until December 31, 2019. I declare that the next contract will be concluded for an indefinite period.

Creditworthiness

The difference between a contract of indefinite and definite duration may be manifested in the amount of creditworthiness converted by the bank.

Example:
Single without children, no credit obligations. Income 3,000 PLN / mth
For an indefinite contract – capacity for PLN 292,000
With a fixed-term contract – capacity of PLN 245,000

Not all, but several banks, vary the amount of creditworthiness depending on whether you have a fixed-term contract or an indefinite period with your employer. The differences can reach up to 30% in the amount of net income assumed.

Income paid in cash

Income paid in cash

In most cases, the remuneration is paid to the account and this is the best form from the point of view of banks. If you get paid out, it won’t be a problem. However, in addition to the certificate of employment and earnings from the employer, you will need to provide a certificate from the Social Insurance Institution (ZUS) on the basis of social security contributions.

There are the first banks that will refuse to grant credit when the client receives remuneration in cash. However, these are individual cases.

Cash loan and mortgage loan

Cash loan and mortgage loan

Interestingly, by obtaining income from a fixed-term employment contract, it is easier to get a mortgage than cash.

With cash, a significant proportion of banks will grant credit for the maximum duration of your employment contract. If it ends in 15 months, you’ll get a 15-month loan.

However, it is worth talking to a financial expert who knows in which banks this type of agreement will not be a problem.

Each bank has its own procedures. One is enough for the contract to be concluded six months ahead, another requires three years ahead. Salary in cash will not be a problem for most, but there will be a bank that will automatically reject income. There are a lot of such nuances, even with the theoretically favorite income which is the employment contract.