By Jesse McPherson

Changing jobs or taking on an extra job can have a big impact on how much you can borrow for a mortgage. Whether you’re moving to a new employer, starting a side hustle, or transitioning from employment to self-employment, different rules can apply when it comes to borrowing money. In this blog, Jesse McPherson breaks down the key factors lenders consider and what you need to know before making your next career move.

1. Can You Get a Mortgage with a New Job?

One of the biggest myths in lending is that if you change jobs, you have to wait a significant period before you can borrow money. Traditionally, banks were hesitant to lend to borrowers who were in a probation period, which is typically the first six months of a new job.

However, times have changed, and lenders now understand that job mobility is far more common than it used to be. If you’ve moved to a similar role in the same industry, lenders are generally quite comfortable approving a mortgage, even if you are still on probation.

Most banks now accept that probation is a standard part of employment contracts and won’t use it as a reason to reject a loan application. The key consideration is whether your new job is in the same field and whether there is an explanation about your new income situation that makes sense.

– The Exception: Commission and Bonus-Heavy Roles

If your new job involves a significant amount of commission-based or bonus income, things can get trickier. Lenders like to see historical earnings before they include commissions or bonuses in your borrowing capacity.

If you move jobs and your income relies heavily on commissions, the bank may disregard those earnings until you have built a solid history with your new employer. This can reduce your borrowing power, so if you’re planning a job change and rely on commission, it’s best to consult a mortgage broker before making any decisions.

2. Getting a Loan with an Extra Job

Many people take on a second job to increase their income and improve their borrowing power. But can lenders use this additional income when assessing your loan application? It depends.

– Working in the Same Industry

If your second job is in the same industry as your primary job (e.g., a nurse taking shifts at two different hospitals), lenders are generally comfortable using that income to assess borrowing power. However, you typically need to show at least three to six months of consistent earnings from the second job before a lender will count it.

– Casual and Part-Time Work

Casual work is more difficult to use for lending purposes. Banks usually require at least six months of consistent casual income before considering it as part of your total earnings. Even then, some lenders will apply discounts to account for the lack of job security.

3. Returning to Work After Parental Leave

If you’re returning to work after parental leave, lenders will assess your application based on your previous employment history. A large gap in employment (three months or more) can raise questions, but as long as you’re returning to the same or a similar role, most lenders will treat it as continuous employment.

However, if you’ve taken an extended sabbatical for other reasons (e.g., travel or personal projects), some banks may require additional justification before approving a loan.

4. Moving from Employment to Self-Employment

When switching from employment to self-employment traditional lenders usually require at least two years of self-employed income history before considering a loan application. However with increasing workforce flexibility, lenders have had to move with the times, so there are exceptions.

– If You Become a Contractor in the Same Field

A common scenario is someone moving from a salaried job to a contracting role, especially in industries like IT. If you’re doing the same work under a contract structure, some lenders will consider your previous salaried income as part of your application. This can allow you to get a loan without the usual two-year waiting period for self-employed borrowers.

– Starting a New Business

If you’re leaving employment to start a brand-new business, borrowing will become much harder. Most traditional lenders will require at least 12 months of profitable financial history before they even consider your application.

If you’re considering self-employment, you should review your borrowing situation and future needs as early as possible before you take the jump.

– Side Hustles

If your second source of income is a side hustle, such as an online store or a freelance gig, lenders will treat it like self-employment. This means they’ll typically require at least one full year (or ideally two years) of tax returns showing consistent income before they count it. If your side hustle is still in the early stages and hasn’t shown profitability, it can actually reduce your borrowing power rather than increase it, since lenders will see it as a financial liability rather than an asset.

Some borrowers don’t think their side hustle is significant enough to mention in a mortgage application. However, if you have an Australian Business Number (ABN), it can show up on your credit file, and the bank may ask for financial details.

If the business is generating losses, it could negatively impact your application. If you’re unsure whether to disclose a side hustle, it’s best to consult your mortgage broker to avoid surprises.

5. Contractors and Borrowing: What You Need to Know

Contractors fall into different categories, and the way lenders treat them varies:

• Contracting through an agency: If you work through an agency like Hays or a similar firm, lenders often treat you like a standard employee. This is the easiest contracting scenario for loan approvals.
• Contracting under your own ABN: If you’re invoicing clients directly under your ABN, banks may require you to provide one or two years of financial history before considering your income.
• Operating under a Pty Ltd company: If your contract requires you to set up a proprietary limited company, borrowing can become more complicated. Many lenders will default to requiring full company financials, making it harder to secure a loan.

6. The Key Takeaway: Plan Ahead

If you’re considering a job change, starting a business, or picking up a side hustle, it’s a good idea to speak with a mortgage broker before making any moves. Even if you’re not looking to borrow immediately, planning ahead can help you structure your employment in a way that keeps your borrowing options open.

Employment changes don’t have to derail your borrowing power. In fact, with the right planning, a new job or additional income stream can help you secure a better mortgage. The key is understanding how lenders assess different types of income and making informed decisions before making any major career moves.

If you’re thinking about a job change and wondering how it will affect your mortgage options, reach out to us at Kingsbridge Private (which is a People + Partners company) for expert advice tailored to your situation. Pick up the phone and give us a call.

7. Disclaimer

This article has been prepared by a division of People + Partners and is not financial advice and is not provided under the AFSL of Fortnum Private Wealth.