Housing loan on commission contract?
The mandate contract, although it still does not give full employee rights, is still a popular form of employment in our country. Unfortunately, according to popular opinion, having such a contract, it is hard to be a reliable customer for banks. We answer, will we actually find confirmation for this theory in reality?
Contracts have their pros and cons both on the side of the principal and the contractor. Not without reason they are called “junk contracts”. Until recently, they were a way for the employer to reduce the cost of employment, because he did not have to pay full ZUS contributions. However, for people in, for example, liberal professions, this is a kind of “financial independence” because in this way they can increase their income by working for several companies at the same time.
Order agreement – what does the bank say?
Currently, banks look at a mandate contract or a specific task contract from the perspective of Recommendation S of the Polish Financial Supervision Authority (KNF), which gave them permission for a lighter approach to retail clients with irregular or unstable income. The assessment of creditworthiness according to the PFSA should lead to an assessment of the possibility of regular servicing and repayment of liabilities. If only the bank decides that a positive assessment can be issued, then such customers can be granted credit despite the irregularity or instability of their income.
When analyzing the loan application, the banks pay attention not only to the amount of income, but also to its regularity, understood as the ability to demonstrate the continuity of orders executed in the period analyzed by the bank. In order for the financial institution in which we are applying for a loan to assess our situation as stable, the breaks in employment cannot exceed one month. The standard is obtaining income in this form for a minimum of 12 months (in rare cases it is as much as 24 months). Of course, we can also meet with exceptions, where, when meeting specific requirements, the bank can expect from us a shorter (than a year) employment period under the mandate contract or for a specific task.
How will the bank calculate income?
The financial institution, at the stage of submitting the loan application, will require the presentation of completed contracts (including those currently in force) and confirmation of the payment of amounts due for the implementation of these contracts. Analysts also often ask for additional documents to determine creditworthiness and income stability. In such a situation, the bank may confirm the employment by phone with the payer, request a tax return for previous years, bank statements or expect to complete a statement on the actual cost of obtaining revenue from the commission / task contracts.
In the case of mandate contracts, unlike in the case of an employment contract, the income assumed in the process of assessing creditworthiness is calculated. Many banks will have a statutory 20 or 50 per cent tax deductible cost to determine income levels. This means that the bank will accept for analysis a much lower income than the actual income of the potential borrower. Of course, there are also such financial institutions that will accept income from the mandate contract at the level of the amounts that affect the bank account. The vast majority, however, will take into account the percentage of revenue generated (e.g. it may constitute 80%).
Where to start?
When choosing a bank, the method of calculating income is not insignificant – it is one of those factors that will determine the amount of creditworthiness in a given financial institution. Being employed under a mandate contract, it is worth remembering that the lack of capacity in one of the banks does not necessarily mean that it is also not available in another bank. The assessment of creditworthiness by banks is carried out according to established procedures. Banks usually have their own methodologies created for this purpose. Credit analysis for a job contract is somewhat more stringent than for a job contract. Hence, clients employed under mandate contracts are often overwhelmed with formalities that must be taken care of when applying for a loan. The bank will expect us to document the mandate or specific work contracts for the period required by it and to meet the abovementioned criterion of continuity of employment. That is why it is worth going to a proven financial advice that will help us get through the procedural requirements of banks and carefully compare available loan offers.