If you’ve ever applied for a mortgage, you’ll know just how thorough the process can be. The lender will go over your finances with a fine tooth comb, checking everything from your debt and income to your liabilities, assets, and credit report.
They need to know you can afford the mortgage repayments now, in the future, and under extreme circumstances.
But what happens if you’re in the middle of a major transition, such as a new job?
Employment is clearly key to the whole process, so will changing jobs stop you from getting a mortgage?
From your perspective, getting a new job probably isn’t a big issue. You might be getting the same—or more—money, and it’s probably hitting your account at the same time every month.
You’re working. You’re getting paid. What’s the problem?
Mortgage lenders look for financial stability. Home loans are substantial and prolonged. Lenders need to be confident that you can make the repayments next month, next year, and 10 years from now. If you’ve been employed in the same role for a number of years, they’ll have that confidence.
If you have only just been hired, they won’t have years of earnings to review. There’s also a higher chance that you won’t remain in that job, as you or your employer may determine that it’s not right for you.
This is known as the probationary period. It’s a period of time in which your new employer can end your contract if they deem that you’re unable to adequately perform the job.
Imagine for a moment that none of this matters and your mortgage lender doesn’t care if you have a new job or not.
The loan is approved, you meet the monthly payments, and three months down the line, you’re relieved of your duties.
It turns out that you weren’t a good fit, and before you know it, you’re unemployed.
At that point, you have a mortgage to repay and no income with which to repay it.
Sure, you could get another job, but that could take months, and there’s no guarantee it will happen. You could miss a few payments and fall behind on your loan. You could miss all of that and force a repossession. Both of those outcomes are more likely following a change in employment and that’s why lenders are so wary of these circumstances.
Switching jobs may affect the process, but it depends.
If you change jobs while going through the home-buying process, it could complicate things. You will need to inform your lender and they will likely ask for more information about your new job. They may need to redo the affordability checks to account for your new salary and they may request information about your pay structure.
If you have a new job at the time you apply for a mortgage, you should experience fewer issues, but they’ll still consider you to be a higher risk.
Although a recent change in employment can be problematic, it shouldn’t prevent you from getting a mortgage on its own. There are many variables to consider, and the lender will take all of these into account:
For example, if you have been promoted to a new role within the same company, or you have moved to a competing company after working the same job for 10+ years, it shouldn’t cause any issues.
However, if you have switched jobs numerous times in the last few years or you’re moving from a salaried position to self-employment, it will affect the loan approval process.
If you have worked at your current position for less than a year, most lenders will consider it to be a new job.
But there is no fixed definition across the industry, and some lenders consider anything less than 2 years to be new.
Yes, your employment history will be considered and a job change will impact the home loan process.
There are a few things you can do to improve your chances of getting a mortgage after changing jobs:
Mortgage lenders want borrowers who are financially responsible. if you can demonstrate that you’re able to save money and have active savings to fall back on, they’re more likely to approve you.
Your credit report will always be checked during the mortgage application process. A low credit score and a history of bad credit could lead to outright rejection or higher interest rates. A high score and a clean credit history will put you in good stead.
Frequent job changes are more likely to worry a lender than a single job change over a long period. Your employment history is key and will be considered.
If possible, ask your new employer to support your salary claims and provide assurances that you will be employed in the long term.
The longer that you remain in your new job, the smoother the mortgage application process will be. So, if you’ve only been employed for a few months, give it at least a year before applying for a mortgage.
Finally, make sure you’re 100% honest about your employment status during the home loan process. That also applies if you are about to switch jobs.
Changing jobs while getting a mortgage can complicate the process, but it won’t necessarily prevent you from getting that loan.
To summarise:
If you’re worried that a recent job change will prevent you from getting a mortgage or securing the best deals, speak with one of our expert brokers today. We are experienced in helping all kinds of borrowers.
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Bill has over 26 years of experience working in the finance industry. He has worked across a number of different businesses including Home Loans, Personal Loans, Collections and Insurances. Bill's passion is to utilise his knowledge and experience in the industry to assist clients in meeting their financial goals.
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