Changing Jobs and Obtaining a Mortgage: What You Need to Know

Changing jobs is an exciting step in your career, but if you're planning to apply for a mortgage in the near to medium future, or are already in the process, it can have a significant impact on your mortgage options.

Lenders prefer stability, and any changes in your employment status can affect how they assess your mortgage application.

In this article, we'll explore two common job change scenarios:

1.????? Moving into a new role within the same company,

2.????? Starting with a new employer

Each situation comes with different considerations that may influence your mortgage journey.

1. Changing Job Roles within the Same Company

A job role change within the same company can be seen as a minor shift by lenders, especially if it’s a promotion or sideways move. Since your employer remains the same, you benefit from having an established employment history, which is one of the key factors lenders look for.

Considerations:

• Continuity of Employment: Staying with the same employer, even if your role changes, usually means there’s less concern from lenders about job stability.
• Salary Increase or Decrease: Intuitively, a salary increase is likely to improve your borrowing power, while a salary drop will lead to a reduction in your maximum borrowing capability.
• Additional Variable Income – When it comes to bonuses, overtime, commission, allowances etc, lenders will use your track record, looking back 3, 6, 12 or even 24 months to gauge how much of this income they’re prepared to use in their calculations. A new role means you have no track record and lenders may not take this income into account at all!
• Contract Type: Moving from a permanent role to a temporary role (e.g. secondment) or a fixed term contract, even within the same company, may introduce more scrutiny from lenders. They all have their own rules and criteria, so understanding your options using a mortgage broker in advance of any change is advisable.
• Timeframe of your start date – If you need to proceed with your mortgage application before you’ve started your new role, several lenders will be happy to accept your new salary up to 3 months before the role begins, requiring a copy of your new contract. Other lenders require you to have started the new role and may even request your first payslip before an application can be submitted.

2. Moving to a New Company

Starting a new role at a different company often raises more questions for lenders, especially if you have a probation period. Lenders want to see stability in your employment, and changing jobs can introduce an element of risk in their eyes.

Considerations:

• Probation Period: Most lenders are fine if you’re within a probation period. From experience, lenders often sense-check that your new role is in line with your previous role and a logical progression. For example, an HR Advisor progressing to an HR Manager role with a 10-20% pay-rise wouldn’t be unexpected, whilst an admin assistant moving into a Senior Manager role with a 100% pay rise would face more scrutiny as to the reasonability that they could perform this role and maintain this higher income level.
• Income: If the new role comes with a higher salary, you may be eligible for a larger mortgage. As previously mentioned, additional variable income is unlikely to be accepted given you have no track record at your new company, however, other income such as car allowance, location allowance that’s confirmed in your employment contract can often be used.
• Employment History: Lenders like to see continuous employment history. If you have gaps of more than 1-2 months between roles, they may request more information to understand why. With a good explanation, this is something that can be navigated and if using a Mortgage Broker, they’ll experienced at doing this on your behalf. ??
• Timeframe of your start date – Again, several will use your new employment/salary if you need to start your mortgage application up to 3 months before your new role commences. Other lenders will require that you’ve started your new role.

What You Can Do to Strengthen Your Chances

• Plan Ahead: If you’re in the process of changing jobs or even thinking about it, let your mortgage broker know early on. This allows them to guide you through the process and find lenders who are more accommodating of your situation.
• Be Open & Honest - We know things can unexpectedly change very quickly and that’s ok! If things change, discuss with your Mortgage Broker, ideally prior to accepting a new role to enable them to provide you with a summary of your options which then allows you to make an informed choice!
• Prepare Your Documents: Be ready to provide detailed employment history, income documentation, and explanations for any employment gaps or changes. Whilst lenders have become incredibly automated, humans often sit behind the scenes underwriting applications and a paragraph or two to explain anything slightly out of the norm can have a big influence on their final decision!
• Wait for Stability: If you’re early in a new job, it may be worth waiting until you’ve built up more income history (of bonus/overtime/commission etc) to increase your borrowing capability, which in turn could enable you to afford the dream home you can’t quite achieve now!

Final Thoughts

Changing jobs can affect your mortgage application, but it doesn’t have to derail your plans – indeed it may actually strengthen your options.

Whether you’re staying with the same company or moving to a new employer, understanding how lenders assess your situation can help you make informed decisions and ensure you proceed with the lender that fits your needs the best.

As always, working with a knowledgeable mortgage broker can make the process smoother and ensure you get the best deal for your circumstances.

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Next Week…….. I’ll be discussing the transition from employment to self-employment. It’s something I’m well versed in, having made the leap after many years in the corporate world to self-employment in 2018!

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Your home may be repossessed if you don't keep up with your mortgage payments.

This article doesn’t constitute advice - your situation and requirements are unique and therefore you should seek expert advice based on your own individual circumstances.

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About Me

I'm Mark Humphrey, founder and Advisor at MHC Mortgage & Protection Ltd, a mortgage broker firm based in Whitstable and helping people buy their homes across the UK.

I've worked in Mortgages for over 20 years and am passionate about making the mortgage and moving process as simple and stress-free as possible.

Buying your home is a BIG DEAL and with a bit more understanding and help along the way - it really can be such a positive experience and not the stressful and anxious time that so many people dread!

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