How Does Changing Jobs Affect Getting a Mortgage?

If you’re considering a mortgage, you may wonder how stable your job needs to be — and if changing jobs can affect approval. Whether you’re employed full-time, planning a change, or just starting a new job, it’s essential to understand the ways changing employment can impact your mortgage during the entire home loan process.

How job stability affects your mortgage application

When a lender hands over hundreds of thousands of dollars, they need to be supremely confident that you can pay off the mortgage over the next 20-30 years. To be sure, they’ll assess eligibility for a home loan, looking closely at your credit history, savings, and most importantly, your income stability and employment.

Here are some things you can expect your lender to consider when reviewing your employment history.

How long you’ve been at your current job

Each lender has their own criteria, but a “new job” is typically considered somewhere between three months and two years. Ask your lender about their minimum period for employment so you understand their criteria.

If you have been in your current role long enough to meet the minimum, your lender may want to see a more detailed employment history. Your credit history will also be critical because it should reveal your ability to repay debt, which is important while changing jobs.

How regularly you change jobs

Frequent job changes could raise red flags, especially if it reveals a pattern of long periods with patchy income and lenders generally need evidence that you can afford to borrow the loan. However, if you’re financially responsible and can demonstrate that through a great credit history and a healthy savings, how often you change jobs shouldn’t really be a big issue.

Remember, lenders are primarily interested in whether you can make repayments. If one gives you a negative response, shop around and look for a new lender before applying. There’s likely lots out there who want your business.

How stable jobs are in your industry

Industry stability may become an issue if you are not in long-term permanent employment and your industry is in the midst of a downturn. In such circumstances, you may need to demonstrate how you can guarantee servicing your mortgage into the future, though every lender will obviously take these situations on a case-by-case basis. This also applies to applicants on a contract for 12 months, for example, if there aren’t many prospects in your location when that contract ends.

The nature of your employment

Lots of people that apply for mortgages are either self-employed, casual, part-time, have a casual role or do contract work, and lenders will often have their own requirements for each type of employment. Again, it’s worth remembering that lenders only really care about having their loan repaid, and there are a number of products on the mortgage market in Australia for self-employed applicants.

🤓 Nerdy Tip

Already have a mortgage? The above points also apply when refinancing, although your lender will likely have other considerations. For example, they will also take into account the equity you have built up in your property.

Other options to consider

If your lender has an issue with any of the above points it doesn’t necessarily mean your application is doomed, although it could place you in a far riskier category, which means they’ll only offer you a loan with worse terms and conditions, such as a higher interest rate or more fees and charges.

Not all lenders require home loan applicants to have had their current job for 12 months, and there are no shortage of lenders who are willing to take on applicants with a poor credit history or a patchy employment record. However, be wary of what they have on offer. Waiting a few years to get a better deal could save you a lot of money down the track.

If you’re unsure about what category you fit into, it always pays to talk to a mortgage broker who should be aware of the types of mortgage products that fit your situation. Additionally, if you have a guarantor who is willing to vouch for your loan, your options will be much better.

When changing jobs after mortgage approval is necessary

Changing your jobs after mortgage approval or pre-approval is not usually a great idea because your lender has based the application on your current employment and income status. Having said that, circumstances change and it may be necessary to change work at some point in the home buying process, which could take the best part of a year or even longer.

If you need to change jobs, here are some questions to ask yourself first.

Can you wait until after settlement?

Waiting until after settlement to change jobs would make things a lot easier. If, however, you need to leave your job beforehand, you definitely need to tell your lender immediately. Failing to do so means you could be accused of providing them with false information for your loan.

Have you already been pre-approved?

Just be aware, if you’ve already been pre-approved, been unconditionally approved or are still waiting to hear back from your lender, any change in your job status will delay the application. This could mean missing out on the property you took the loan out for in the first place because there are other buyers and the seller won’t accept any delays.

The lender can always turn your application down, or they may revise the amount they are willing to lend you if your income falls or they don’t see enough stability in your new position.

You may have to resubmit an application under these circumstances and the lender may apply their minimum period to the application. Under such circumstances you may need to wait a few months to resubmit an application.

Is your new job better?

It’s also worth noting that a lot of the time, hopefully the majority, a new job means more income, which your lender will regard as a definite plus. However, if your income decreases or becomes less stable, you might need to wait a few months in the new role to reapply.

Once again, having a good credit history and an all-round record of financial stability should work to your advantage if you need to change jobs.

Did you quit?

If, on the other hand, you quit your job during the mortgage process, it is highly likely that the lender will terminate the application. You can still find lenders out there that are willing to take on such borrowers, but you’ll need to be able to demonstrate your ability to repay the mortgage some other way and the terms and conditions will undoubtedly be harsh.

Balancing career moves with mortgage goals

Balancing a career change with the immediate demands of getting a mortgage together is difficult and requires careful planning. Ultimately, you’ll need to decide what is more important to you. Do the benefits of switching jobs outweigh the potential impact on your mortgage application, especially if it’s your first home?

If you’re thinking about changing jobs or your employment status after submitting a mortgage application, waiting until your mortgage is finalised — or at least closely communicating with your lender — may make things a lot easier.