Can you get a mortgage if you have just changed jobs in Australia?

Securing a mortgage in Australia after a recent job change requires demonstrating financial stability and employment reliability to mitigate lender concerns. Applicants can enhance their approval odds by providing detailed documentation of their new job, increasing their deposit, maintaining a strong credit score, and reducing other debts, especially if the new job involves a probation period or a shift in industry.

Obtaining a mortgage is a significant step, and for many, it marks a milestone in financial stability and personal achievement. However, the path to mortgage approval is paved with various checks and balances, one of which is employment stability. In Australia, like in many parts of the world, having a steady job is crucial when applying for a mortgage. This article explores the implications of changing jobs just before or during the mortgage application process and provides insights into navigating this complex situation.

Basic Requirements for a Mortgage Application

When applying for a mortgage, lenders look at several key factors: your credit score, debt-to-income ratio, deposit, and, importantly, employment history. Stability in your job and income is vital because it assures lenders of your ongoing ability to meet monthly payments. Typically, lenders prefer a minimum of six months in your current job or two years within the same industry or job type, which demonstrates reliability and financial stability.

Impact of Changing Jobs on Mortgage Eligibility

A recent job change can be a red flag for lenders, primarily if it suggests instability or a decrease in income. However, not all job changes are viewed negatively. Positive impacts can be seen when the job change involves a move to a higher-paying role or a more stable sector. Conversely, moving to a commission-based role or a contract position might be viewed as less favourable due to the potential variability in income.

What Lenders Look for in Applicants Who Have Recently Changed Jobs

Lenders scrutinise recent job changes to ensure the borrower isn't at increased risk of unemployment or financial strain. Key considerations include the nature of the job change, the terms of employment, and the income stability it offers. Applicants need to provide additional documentation such as new job contracts, recent pay slips, and possibly letters from employers detailing the job permanence and terms.

For those in a probation period typically ranging from three to six months, lenders may exercise caution. Successfully navigating this period with sustained income evidence can assuage lender concerns, emphasising the stability and long-term viability of the new role.

Strategies to Enhance Mortgage Approval Odds After a Job Change

To mitigate the perceived risk presented by a recent job change, applicants can take several steps:

Increase the Deposit

Offering a larger deposit can reduce the lender’s risk, offsetting the instability of a new job.

Maintain a Strong Credit Score

Demonstrating good credit management can reinforce your reliability as a borrower.

Reduce Debts

If you pay off your debts, this makes you a less risky borrower, enhancing your appeal to lenders.

These strategies, coupled with comprehensive documentation of your new employment situation, will help strengthen your mortgage application.

Additional Factors That Lenders Consider

Beyond the immediate implications of a job change, lenders also consider the broader context of your employment. This includes the industry stability, the demand for your profession, and whether your income is expected to grow, remain stable, or potentially fluctuate. For instance, industries known for volatility might require more substantial evidence of job and income security than more stable sectors.

Case Studies

Consider the case of John, who recently moved from a part-time consulting role to a full-time position in a reputed tech firm three months before applying for a mortgage. Despite being in the probation period, John provided his new employment contract showing a significant salary increase and a letter from his employer confirming the likelihood of long-term employment. Coupled with a 20% deposit, John's mortgage application was viewed favourably by lenders.

In another instance, Sarah, who switched to a freelance graphic design career six months before her mortgage application, struggled with her first application as she could not provide consistent income proof. After consulting with a top mortgage broker, Sarah waited another six months, gathering sufficient invoices and tax returns to demonstrate her income stability, which eventually helped her secure the mortgage.

Conclusion

Securing a mortgage after a recent job change in Australia is certainly challenging but not impossible. It requires thorough preparation and an understanding of what lenders are looking for. By demonstrating financial stability, preparing the necessary documentation, and possibly adjusting your strategy to present a lower risk to lenders, you can successfully navigate the mortgage application process. Prospective homebuyers should ideally wait until after the probation period to apply or gather substantial evidence to demonstrate job and income stability if applying sooner. Remember, every lender has different criteria, so consider consulting with a mortgage broker to better understand specific requirements and enhance your chances of approval.


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