JobKeeper has been a lifesaver for many Australians. Workers have retained their jobs, employers have been able to hold onto their staff and businesses have been able to stay afloat thanks to the Federal Government’s JobKeeper $130 billion program. An estimated six million Australians are currently receiving the subsidy which commenced in March 2020, following the COVID-19 outbreak in Australia; and has just been extended (in a more targeted way) through to 28 March 2021.
In response to the COVID-19 crisis, both banks and non-bank lenders have tightened their lending policies in several areas:-
- assessment of unstable and irregular income,
- high LVR loans,
- assessment of rental income from investment properties.
This leaves us with a question being asked by many. "If I've ended up on JobKeeper, can I still borrow for a home loan or refinance an existing loan?".
The answer is a little more complex that at first glance. Some lenders, especially many of the major banks, have announced that they won’t accept loan applications that rely on JobKeeper payments. But, if you are maintaining the same hours and continuing to receive your regular income - over and above the JobKeeper payment - then you may still be eligible for a loan. If, on the other hand, your hours have been reduced and you are receiving less take-home pay than before JobKeeper, a lender will assess your application based on the lower salary.
If you are a business owner, you will struggle to qualify for a home loan if your business has had to close or is operating on limited hours. If you are an employee, and getting paid less than $1,500 a fortnight, but have had your salary boosted up to $1500 a fortnight, you are also unlikely to qualify for a loan.
It is for these reason that you need to be able to provide the following documentation to support your home loan application:
1. Confirmation of your current and previous salary
You will need to provide payslips that show your current and previous salary. These will set out what your normal salary is and what it will return to, when JobKeeper finishes.
2. Bank Statements
Being able to demonstrate that your income is being deposited into your bank account is an excellent way to confirm your salary.
3. Confirmation Letter from your Employer
Request a letter from your employer confirming your current circumstances and if your income has changed over COVID-19 and why.
4. Investment Income
An explanation of any rental income confirming your current circumstances and if your rental income has changed over COVID-19 and why.
Lenders may also ask for the following additional information:-
- Any changes to your working hours - up or down.
- Any corresponding changes to your salary.
- When you expect to convert back to your normal salary or hours.
- Any changes to your living expenses over this period. For example, this may include working-from-home office costs, reduced childcare costs, reduced vehicle costs, cancelled travel plans and so.
If you are considering applying for a new loan or refinancing an existing one, whilst on JobKeeper then feel free to contact Rob Emmett, Mortgage Broker, who would be happy to answer any questions you may have and assist you to navigate the application process. Whether you're experiencing financial hardship through reduced hours, or a disruption to your business, we stand ready to lend a helping hand.