How Does Changing Jobs After Mortgage Approval Affect Me?
One of the core components of any mortgage application is your job role and, more specifically, the amount of income you have. Lenders want to make sure you can afford to pay back the money they lend you.
In the UK the job market is extremely active and it is common for people to switch job roles regularly.
There are many reasons for this.
Some people want to increase their income while others simply want to change their job to strike a better work/life balance.
But what does switching jobs do to your mortgage or mortgage application?
The answer is it depends what stage of the process you’re at and this guide breaks down everything you need to know.
Let’s jump in.
Does Changing Jobs Affect My Mortgage Application?
The answer to this is it depends on your work situation.
There are many different reasons why you might have changed jobs and the role you take on can also affect your application.
Whenever you change job during a mortgage application you will need to inform the lender.
To get a better understanding of how changing jobs affects your mortgage application let’s look at the events that can lead to a job change.
Redundancy and a Mortgage
It is estimated that each year 170,800 people will be made redundant or 5.6 people per 1000 people in employment.
While not common to be made redundant, it is something that crops up from time to time and can be extremely problematic if you’re in the process of getting a mortgage.
If you’re made redundant during the mortgage process, you will need to find a new job and update the lender.
If you fail to find alternative work, then the mortgage application will be re-assessed at that time, and with no ongoing income the likelihood of a decline is high.
Unfortunately, even if you do find a new job, redundancy can still rear its ugly head because your new job will likely include a probation period.
When you’re in probation, lenders will assess the likelihood of redundancy as being higher the old adage of ‘last in first out’.
As a result, lenders may ask for more details about your job role, your position within the company, and your probation period.
New Jobs and Probation Periods
Aside from redundancy, probation periods carry other risks for lenders.
During a probation period, an employer can pretty much terminate your employment instantly.
This job uncertainty is probably an uneasy feeling for you, and your lender will have the same uneasy feeling.
Probation periods don’t automatically cause your application to fail and lenders assess them on a case-by-case basis.
For example, if you’re a specialist within your industry and new company, they are more likely to view the job as secure because a company would have difficulty replacing your skillset.
If you’re in unskilled or low-skilled work, a lender might be concerned your role would be easy to fill if you fail your probation period which reduces your overall job security.
Lastly, different companies operate different timeframes for probation periods and the shorter the period the more likely a lender is to be favourable.
If you have a probation period of 6 months or more, it extends the risk to lenders because there is a longer timeframe which you can be let go from your job in.
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Moving from Employment to Self-Employment
If you become self-employed when you’re making a mortgage application, the lender will almost certainly decline the application.
This is because they will have no track-record of self-employment to work from in order to understand your income.
You will need to have worked for 12 months and filed your first year’s tax return before any lender will consider self-employed income.
Even then, many lenders will ask for 2 or more years worth of Tax Calculations & Tax Year Overviews, which are generated when a tax return is submitted to HMRC, to get an idea of your income over time.
If you’re self-employed and looking for a mortgage, contact Boon Brokers.
We offer fee FREE mortgage advice and have expertise in arranging self-employed mortgages.
Moving from Self-Employment to Employment
Conversely, moving from self-employment to employment doesn’t always impact your application negatively.
Having an employed status gives the lender a fairly solid idea of your income going forward which reduces risk to them.
They will of course want to see details relating to your probation period as discussed above.
Moving from Employment to Being a Contractor
If you’re moving from employment and becoming a contractor, lenders will see this as a higher risk, but it may not cause your application to decline.
The devil will be in the details here and a lender will probably ask to see a copy of your contract.
They will look at your remuneration and how long the contract is in place and then make their assessment based on that information.
If it is a long-term contract, you may be able to proceed with the application as expected.
But if the contract is short term, a lender is likely to view this as an unacceptable risk.
In their mind, they will be wondering how you can pay the mortgage when your contract ends.
The sooner it ends, the higher the risk for the lender.
What Our Clients Have To Say
Why Do Mortgage Lenders Care if You Switch Jobs?
When it comes to mortgage underwriting and decisions, a lender is primarily concerned about risk.
They want to know the job you have (and income) is enough to cover the mortgage payments comfortably.
When you switch jobs, you will almost always have a change in your income.
Because income is so important in calculating whether a mortgage is affordable a lender will scrutinise the job change closely.
If they feel the job change poses additional risk, they may change the type of product they offer you (potentially reducing the amount you can borrow) or decline the application.
On the flipside, if the job change doesn’t present added risk, a lender will likely proceed as normal with your application.
On rare occasions a job change can be beneficial to a mortgage application, especially if your new role has a lot more income than your previous one.
What if You Have Just Started a New Job?
If you have started a new job, you should contact your mortgage broker and discuss your options going forward.
As mentioned, it might not have any impact at all on your mortgage application but it could impact it significantly, so it’s best to check.
Your broker may advise to continue your application as normal, or they may decide it is best to go back to the drawing board looking at other lenders that will be more favourable to your situation.
Getting ahead of the curve can prevent an unnecessary decline which can impact future mortgage applications.
It might also be the case that your broker can find a better mortgage product because the change in your circumstances is more favourable overall.
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What Happens if My Salary Decreases?
If your salary decreases this can have one of two outcomes for your mortgage.
- If you passed affordability comfortably, you might find that a decrease in your income doesn’t affect the mortgage application. This is because even with the decrease in income you still have enough income to pass the affordability calculation.
- The opposite can happen if your income is no longer adequate for the affordability calculation, and you will find your mortgage needs to be reassessed.
Reassessment could be a matter of your broker looking for another lender with a more generous affordability calculation or it could mean borrowing less than you had planned.
Once again it really comes down to your personal circumstances and a lender will look at the information that is presented to them before making a decision one way or another.
Your broker will be able to explain the impact in more detail and outline the options available to you.
What if My Salary Increases?
If your salary increases this is normally positive for your application.
You may want to continue your mortgage application as is or you may ask your broker to assess if you can borrow more.
An income increase isn’t always a positive factor, remember that other factors that we have outlined above can have a serious impact on your mortgage application.
If you have a high-risk job because the probation period is long or you have moved to self-employment, it won’t make much difference that your income has increased as the overall risk will still be present to the lender.
What Happens if My Job has Variable Income?
Variable income jobs are tricky for lenders in general regardless of if you have recently taken the role or not.
You could have worked in that job for decades with a variable income and a lender might still find it difficult to discern a baseline for your income and conduct an affordability calculation.
The nature of your income will be the primary concern here.
- Are you in a commission-based role?
- Do you rely on hitting targets for a bonus?
- Do you have irregular bonuses?
How you earn your money will be the main factor that a lender looks at. If your bonus is contingent on meeting in-job requirements, then a lender may disregard bonuses altogether and instead take your basic salary for affordability.
If you have a non-contingent bonus structure that pays regardless of targets, or other variable metrics, then a lender may take your bonuses into account for affordability.
Complicating matters further is all lenders treat variable income in different ways so you will need to ask your broker to match you with a lender and product that fits your job.
Are Some Job Changes Considered Unacceptable?
Yes, there are some restrictions that lenders have for jobs when it comes to a mortgage that can negatively impact an application.
A good example of this is if you’re working overseas for more than 180 days a year.
Remote working is becoming increasingly popular but there are circumstances where nomadic-style jobs cause problems for lenders.
The nature of your work in general shouldn’t be a problem with a mortgage.
For example, you can be a soldier and have the same products available as a shop assistant.
Aside from the mortgage, you might find that obtaining life insurance is complicated in high-risk occupations.
If you’re in the armed forces, you may need to turn to PAX in order to source a policy that will cover your mortgage.
What Should I Do if I Have Changed Jobs?
If you’ve changed jobs, you should do the following;
- Compile as much documentation for your new job role as possible to provide as evidence to the lender. You will want to keep a copy of your offer of employment, contract and any documentation around bonuses and remuneration.
- Speak to your mortgage broker and inform them of the changes. It may be that they can provide a solution to any problems your job change can cause.
- Don’t stress too much, in most cases a mortgage will be possible even if you have to delay the application for a short period of time.
What’s most important is that you update your broker. If your broker fails to find a product that fits your changes it might be because they don’t have access to enough lenders.
In these cases, it is best to approach a whole of market broker who has a large panel of lenders.
They will be able to source products from lenders that might not be available to other brokers which can in turn save your mortgage application.
Boon Brokers is a whole of market, fee-free, mortgage, insurance and equity release broker.
If you have changed job roles or are having difficulty getting a mortgage, contact Boon Brokers today.