COVID-19 has thrown most people’s plans for 2020 out the window, with strict government restrictions resulting in plans being cancelled and many jobs affected. For first home buyers who have been saving their home loan deposit for some time, it may feel like the prospect of getting a home loan is now delayed or out of reach. However, if you already have or are close to having your deposit saved, you may still be able to get a home loan even if your income has been reduced.
One of the most common questions we are being asked at the moment is around JobKeeper payments and borrowing capacity. If you are receiving JobKeeper payments from your employer, there are still lenders who will fund your home loan.
If your wage prior to COVID-19 was the same as, or less than, the JobKeeper payment of $1,500 per fortnight (before tax), than most lenders won’t have an issue with your home loan application because your borrowing capacity would remain the same. However, if your wage was more than the JobKeeper payment prior to the pandemic, majority of lenders will base your borrowing capacity on your newly reduced wage.
With high uncertainty around job security in many industries, there is increased scrutiny around applicant’s job security and lenders are requiring a Letter of Employment confirming the continuation of employment from your employer. In addition to this, they are also going through bank statements to ensure wage deposits into your bank account match up against your recent payslips.
Not all lenders are funding on this basis, and some won’t lend to those in the tourism, hospitality or airline industries.
During times of uncertainty, funding home loans becomes a higher risk for lenders and there is an increased chance of them changing their requirements. While nearly all lenders required a 20% deposit to get a home loan and avoid Lenders Mortgage Insurance (LMI), some lenders have increased this to 30% without the option of LMI. A mortgage broker will be able to provide advice around your situation and ensure your loan application finds the right lender for your circumstances.
For more information, contact us today.