How Term Contracts Can Affect Your Mortgage Approval

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Securing a mortgage while on a term contract can be more complicated than for those with permanent, full-time jobs. Lenders often see term contracts as less stable and more risky. However, understanding how term contracts affect mortgage applications can help you prepare and increase your chances of approval. This guide will explain the impact of term contracts on mortgage approval and offer tips to navigate the process.

Understanding Term Contracts

A term contract is an employment agreement that lasts for a specific period, such as six months or one year. Unlike permanent positions, term contracts have a defined end date, which can make lenders hesitant to approve mortgages due to the perceived instability of your income.

Impact on Mortgage Applications

Lenders assess various factors when reviewing mortgage applications from individuals on term contracts. These factors include your employment history, the nature of your industry, and the stability of your income.

1. Employment History: Lenders prefer applicants with a consistent employment history. If you have been on term contracts with the same employer for an extended period (at least two years), lenders are more likely to view your income as stable.

2. Industry and Employer: The nature of your industry and employer also plays a significant role. Working for a government agency or a well-established company can positively impact your application, as these positions are seen as more reliable.

3. Recent Employment Insurance (EI) Claims: If you have taken EI due to unemployment in the past couple of years, lenders may view your income as less stable, which can affect your mortgage approval.

Term Contracts and Mortgage Approval

Term employment contracts are dealt with on a case-by-case basis. If you have been on a term contract with a two-year history through the same employer, you shouldn’t have any issues. It becomes a more challenging prospect, however, when you have just started on your first term of a year or less. This is one of those situations where it really depends on factors like how long you have been in the industry, the nature of the company you are working for (are you working for the government?), and whether you have taken EI in the past couple years due to unemployment with this type of work. It is possible to get approved on the first year of a term, but it is on an exception basis.

Strategies for Getting a Mortgage on a Term Contract

While being on a term contract can complicate the mortgage process, there are strategies to improve your chances of approval:

1. Build a Strong Employment History

If possible, aim to stay with the same employer for at least two years, even if it means renewing term contracts. This demonstrates income stability and reliability to lenders.

2. Provide Detailed Documentation

Provide comprehensive documentation of your employment history, including past term contracts, letters from your employer, and evidence of consistent income. This helps build a case for your financial stability.

3. Consider a Co-Signer

A co-signer with a stable income can strengthen your mortgage application. This person guarantees the loan, reducing the risk for the lender.

4. Save a Larger Down Payment

A larger down payment reduces the amount you need to borrow, making you a less risky candidate. This can offset concerns about your term contract status. For more details, check out our guide on down payment strategies for first-time home buyers​.

5. Work with a Mortgage Broker

A mortgage broker can help you navigate the complexities of securing a mortgage while on a term contract. Brokers have access to multiple lenders and can find the best options for your unique situation.

Frequently Asked Questions on Term Contracts

Can I get a mortgage while on a term contract?

Yes, you can get a mortgage while on a term contract. However, it may require additional documentation and planning to demonstrate your income stability to lenders. If you’ve had financial setbacks in the past, read about securing a mortgage after bankruptcy or a consumer proposal​​ for more strategies.

Will my term contract affect my mortgage application?

Being on a term contract can impact your mortgage application, as lenders see it as a period of employment uncertainty. Providing detailed employment history and considering options like a co-signer can help mitigate this impact.

Should I wait until I have a permanent job to apply for a mortgage?

If possible, having a permanent job can make the mortgage application process smoother. However, if you’re already on a term contract, providing comprehensive documentation, a larger down payment, and working with a mortgage broker can improve your chances of approval.


While being on a term contract can complicate the mortgage application process, understanding its impact and employing strategic approaches can help you navigate these challenges successfully. By building a strong employment history, providing detailed documentation, and considering options like a co-signer or larger down payment, you can enhance your chances of securing a mortgage.

If you have any questions or want to explore this in further detail, please feel free to reach out to me, Alex Lavender. I would be more than happy to assist you, and there is no cost or obligation for a meeting with me.

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