As we start to settle into the new year many people start to think about their careers and potentially changing their job. This has been fueled even more as a result of the Covid-19 pandemic, which has left many questioning the role that work plays in their life.
Whilst figures from ABS show that only 7.6% of employed Australians changed jobs in the year to February 2021 — a rate that has been steadily declining since the peak of 19.5% in 1989, many wonder what would be the impact on their home loan application should they change roles.
The good news is that many lenders are now taking a more human approach to their lending criteria depending on your circumstances.
From the lender’s point of view, your employment history and income are important aspects of your potential to make payments without financial difficulty. Lenders always want to see evidence of a steady and reliable income that will continue for at least the next three years. This doesn’t mean being in the same job for 3 years, but within a similar role.
Below are a few types of changes in employment that may affect your home loan approval:
- Changing from a salaried role to one based on commission or bonuses: Commissions, bonuses, and overtime earnings are usually averaged over the last 24 months. Your income can possibly be seen as less guaranteed and make it harder for the lender to determine your future income.
- Changing to an entirely different industry or position: Lenders are more likely to favour borrowers with at least two years of experience in their current industry so it’s best to wait before you change to a different industry.
- Changing jobs frequently: Frequently changing jobs between industries or companies several times within a 3 year period is a red flag for most lenders. As it shows there is no income stability.
- Becoming self-employed: If you’re becoming self-employed or starting your own business, even less of your income is guaranteed. Most lenders require a two-year history of self-employment before even considering mortgage approval for self-employed borrowers.
So, if you are thinking of changing jobs but also looking to apply for a mortgage, give us a call and we can help you through the process.
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