The Government’s JobKeeper and JobSeeker have collectively supported millions of Australians, but recipients will likely find it significantly harder to get a home loan, a broker has said.
More than 1.64 million Australians are receiving the JobSeeker unemployment payment, and if they’re looking to secure a home loan, Pink Finance director Nicole Cannon has some bad news.
“If you’re on JobSeeker, pretty much you’re a ‘no’,” she said.
“They’re unemployment benefits, so if somebody is on JobSeeker, basically until you’ve got work the lenders can’t really look at it.”
However, for the Australians on JobKeeper, the story is a bit different. While some lenders will also refuse to consider applicants on JobKeeper, others will take a look depending on the worker’s industry and their pay history.
“Some lenders are taking a really optimistic approach and some lenders are taking a very negative approach,” she said. “It’s a minefield.”
Cannon said some industries like the travel and hospitality industries will attract more caution from lenders, while other lenders will calculate borrowers’ capacity based on their return-to-work plan.
“If they’ve got a letter from the employer saying, they’ll start on this date, they will go back to full pay and full conditions, the banks will then consider whether their back-to-work income, provided they’ve got savings to cover the repayments until that date,” Cannon said.
The same goes for workers who have voluntarily taken a pay cut. Cannon has had clients from Qantas and in real estate who both worked in head office and who had taken voluntary pay cuts. She said that in both cases, the lenders accepted a return-to-work pay in their borrowing capacity assessment.
“Other lenders will just go by the JobKeeper payments, so the $3,000 a month, and the loan will be based on that for the servicing. So it’s very very different per lender.”
Her biggest advice? Get pre-approval. Cannon said lenders’ time to approve loans has ballooned out to as much as four weeks, so it’s critical that potential buyers have that lined up before making any big decisions.
And avoid online calculators.
“Don’t rely on online calculators for borrowing capacity because they can really set false expectations of what can be borrowed,” she said.
The calculators can as much as double borrowers’ expected borrowing capacity based on often faulty metrics that fail to place as much weight on things like credit card expenditure as banks will, leaving borrowers in a nasty position should they choose to buy before getting pre-approval.