An estimated six million Australians are currently receiving the Commonwealth government’s JobKeeper wage subsidy. Chances are, you may be one of them. So, can you still get a home loan even if you’re receiving the JobKeeper payment?
Many aspiring home buyers have been saving hard for years and may have hoped to buy a property in 2020, before the COVID-19 pandemic hit. So, if you’ve ended up on JobKeeper payments, can you still borrow for a home loan?
JobKeeper works by granting employers a $1,500 fortnightly payment for each eligible employee which they then pass on as salary. To qualify, a business usually needs to have suffered a 30% decline in revenue due to COVID-19. Big businesses (i.e. those turning over more than $1 billion a year) must experience a 50% dip in revenue.
If you usually earn more than $1,500 a fortnight, your employer can use the JobKeeper payment to subsidise your regular wage. If you usually earn less than $1,500 a fortnight and your employer applies for JobKeeper on your behalf, you’ll actually receive a temporary pay rise to $1,500 a fortnight.
Some lenders, especially many of the major banks, have said that they won’t accept a loan application relying on JobKeeper payments. However, you may still qualify for a home loan while you’re receiving JobKeeper payments with some lenders, so long as you’re working regular hours and continuing to receive your regular income. If you’ve had your hours cut so that you’re receiving less take-home pay, a lender will assess your application based on the lower salary.
You’re unlikely to qualify for a home loan if your business isn’t operating or if you’re working reduced hours. You’re also unlikely to qualify if you normally get paid less than $1,500 a fortnight but have received a pay boost due to JobKeeper.
For this reason, if you’re receiving the JobKeeper subsidy, any bank to which you apply is likely to ask you to provide the following documents to support your home loan application.
A lender will ask you to provide payslips showing your current salary and your salary before JobSeeker payments took effect. That way they can verify your income hasn’t changed or confirm the extent of any changes.
If your income has changed, a lender may ask for a letter from your employer explaining the reasons behind it and when and whether they expect it to return to normal.
A lender will be interested in seeing evidence of your salary entering your bank account to confirm what you’ve told them, so be prepared to provide copies of your bank statements.
If you receive income from an investment property or other assets a lender will want to know the extent to which this has also been affected by COVID-19.
If you’re self-employed or run your own business, a lender may be interested in seeing the extent to which your business’s income has been affected by COVID-19. They may also be interested in finding out what strategies you have in place for managing your business and your cash flow.
The effects of COVID-19 mean that most lenders are becoming more cautious when it comes to approving loans. They’re also likely to take more time assessing your application than previously and may ask you to provide extra information.
For this reason, there are several things you should consider doing to make sure your loan application has the best chance of succeeding.
Your loan application is likely to be closely scrutinised. The more groundwork you put into making sure you have all the documents and information you’ll need, the more likely your application will succeed.
Different lenders have different lending criteria. For example, some will count JobKeeper payments towards a home loan, others won’t. By finding this out in advance and applying only to those likely to consider your application, you’ll save yourself time and energy.
Any mortgage with a low loan-to-value ratio (LVR) will be more attractive to banks because it’s lower risk. If you don’t have a large deposit, consider using a guarantor to reduce the lender’s exposure and make your application more attractive.
Your LVR is only one part of the loan. Your income, and ability to service repayments, counts just as much. Make sure you understand how far this stretches before you apply.
You can find out exactly how much you’re likely to be able to service using our mortgage calculator.
A mortgage broker won’t just try to find you a better deal, they’ll also understand which lenders are more likely to look favourably on your application during COVID-19.
Nathan joined Fox Finance Group in 2018 to help drive the strategic growth of the business and also help build on the solid foundations that have held strong in the business since 2006.