Changing jobs may offer more perks – higher income, greater fulfilment, and the opportunity for growth are often things people look for in a new gig. But could it also impact your mortgage application?
January and February each year is typically prime time for people considering switching jobs – the Christmas holiday period is in the rearview mirror and a new year of possibilities lies ahead.
In fact new LinkedIn research shows 59% of workers are thinking about leaving their job in 2023, with more than half saying they’re confident of finding something better.
Coincidentally, 2023 could also be a good time to start considering your next property purchase, with house prices reaching a record decline of -8.40% in January from the May 2022 peak.
So could a job change impact your mortgage application? The short answer is it could.
But how much of an impact it has depends on a few factors.
Can you still land a mortgage?
Employment histories with frequent job changes over short timeframes can raise lenders’ eyebrows.
But even with a rock-solid employment profile, lenders may view a fresh job change as an added risk.
Lenders love to see stability. Staying in a job and building up your employment and financial profile will improve your mortgage approval chances.
A new job is less stable than one you’ve been in for a long time. There could be probation periods for both you and your employer to see if the role fits.
But you still may be able to land a mortgage with a new job.
Some job changes are low risk, with possibly minor effects on your mortgage application.
And some are high-risk and may result in delays and more hoops to jump through.
Low-impact changes
A change lenders consider less risky is switching to a permanent, salaried role in your current industry.
This is because you have a proven record of holding employment in this field and have the promise of a steady paycheck streaming into your bank account.
Typically, lenders want to see at least two to three of your most recent payslips. Some may require you to have your new job for at least three months.
So as long as you have a good financial profile, meet the requirements, and don’t have an unstable employment history, you may experience minimal impact.
But ultimately this depends on the lender and the loan.
High-impact changes
Considering a complete career overhaul, starting a business, or switching to casual, contract, or freelance work?
These are exciting changes that may result in more fulfilment, flexibility and money, if the stars align.
But while opportunity is on the cards, so too is risk – as far as lenders are concerned.
This is because sometimes to enter a new industry you have to accept lower-paying roles. Or because it can take some time to thrive in a new industry or business.
Similarly, casual work (and similar) often has higher pay rates. But part of this is to offset the lack of benefits you may receive, such as job security, severance pay and sick leave.
Suffice to say, all these types of job changes may make the mortgage application process more difficult.
However, there could be lenders who will consider your application if your financial profile is otherwise hunky dory and your previous employment history is stable.
Lenders may want to see more than the typical two to three payslips. Some may also require you to be employed in your new role for at least three to six months.
And self-employed applicants typically need to show at least a year’s worth of business income records.
These added requirements may result in a need to delay applying for a mortgage for a little while.
Find out more
Switching up your employment and landing a mortgage can be tricky. But having a helping hand can make the process easier.
We can point you in the direction of lenders more likely to consider your situation and help put together an application that presents your situation in the best possible light.
So if both a career change and a new property are on the cards for you in 2023, give us a call today.
Refinancing your home loan for debt consolidation
Another method people use for debt consolidation is rolling it into a refinanced home loan, because mortgages offer comparatively low-interest rates.
So if you’re really struggling with multiple debts right now – such as a car loan or a number of credit cards – consolidating your debts into your home loan will, in most cases, reduce your overall monthly repayments.
However, here’s a big word of warning.
While this option can reduce your monthly repayments now, debt consolidation through your mortgage can turn a short-term debt (like a personal loan) into a much longer-term debt.
As such, unless you aim to make a lot of extra repayments as soon as possible, you could end up paying significantly more interest than you would have otherwise.
One way to address this issue is to create a loan split for the debt consolidation, giving you the ability to pay off all the short term debts within a few years, rather than, for example, over a 25-year home loan period.
So if you’re in need of breathing space now, debt consolidation is an option to consider – especially with mortgage rates so low at present due to the RBA’s official cash rate being at record low levels.
Get in touch today
If you’d like to explore your debt consolidation or refinancing options, then get in touch with us today and we can help you look at ways to take some financial pressure off your shoulders.
It’s also worth noting that lenders are providing mortgage holders impacted by COVID with a range of hardship support measures, including loan deferrals on a month-by-month basis.
Whatever your circumstances, we’re here to support you however we can through these times.
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