Employment Letter For A Home Loan
Why does a bank need an employment letter?
When you apply for a home loan the bank will need you to provide proof of your income. In most cases this is in the form of payslips, tax returns, a notice of assessment, group certificates or any combination of the four.
In some cases the bank can use a letter of employment to confirm your income or will use it to verify the other documents you have provided. Most banks require two forms of income verification, for example one recent payslip and a letter from your employer.
Bank requirements for employment letters
Australian lenders have similar requirements for employment letters, and will often ask for a letter to be amended if it does not meet their requirements.
Your employment letter should be:
- On a company letterhead that contains contact numbers and the company ABN,
- Contain the name of person who signed the letter,
- Contain the name of employee, gross income, length of employment and status (permanent part time / casual etc) of employment, and
- Explanation of anything unusual about your employment, if required.
Most lenders will accept a faxed copy however some will require your mortgage broker to hold the original on file.
Employment letter template
You can ask your employer to use this sample letter as a template. All they need to do is copy it onto their letterhead, amend the details, print, sign and fax it to us, your mortgage broker.
To Whom It May Concern:
Re: John Smith
We confirm the following details regarding John Smith’s employment with us:
- His salary is $80,000 p.a. gross.
- His net salary is $60,760 p.a. (Only some lenders require the net salary)
- He is employed on a permanent full time basis.
- He started work with us on the 1/1/2009
- He is not on probation.
Should you require any additional information please do not hesitate to contact Human Resources on 02 0000 0000.
Human Resources Manager
ABC Pty Ltd
Please read below section on bank requirements for employment letters to ensure your letter is accepted!
If you are using us at the Home Loan Experts to arrange your loan then please ask your employer to fax the letter to us using the number on our contact us page.
In some cases banks may ask for clarification regarding your employment as a condition of your home loan approval. Due to privacy legislation many employers will not talk to the bank directly, so you will have to request your employer to write a letter for the bank.
Some common clarifications that banks may ask for are:
- Deductions from pay: We confirm that John has a deduction of $500 / week as an additional voluntary super contribution. This can cease at any time at John’s request.
- Salary packaging: We confirm that John pays $600 / week directly into his current home loan using our salary packaging scheme. This $600 deduction is paid pre-tax meaning that he receives $31,200 of his salary tax free, and is taxed only on the remaining $48,800.
- Company car: John has the use of a company car as part of his salary package.
- Change of income: John has recently received a promotion and now earns $90,000 p.a. gross as of the 1/1/2010.
- Employment stability: Although John is technically employed on a casual basis he is considered to be a permanent member of our staff, works regular hours and is expected to continue to work here for the foreseeable future.
- End of probation period: We confirm that John’s probation period ceased on the 1/1/2010.
- Overtime income: John is required to work overtime as a condition of his employment. John has been working overtime on a regular basis and can reasonably be expected to continue to work overtime in the foreseeable future. It is likely that additional work will be available should John decide that he would like to earn more than his current salary and overtime payments. (Many lenders do not accept 100% of overtime income, contact us to find a suitable lender)
- Self employed contractor: John works for us as a sole trader and invoices us for his hours worked. John has no employees, provides no materials and has no major expenses so has a stable income similar to a PAYG employee. John currently earns $1,200 + GST / week. We expect his contract to be ongoing for the foreseeable future. (Not available with most lenders, contact us to find a suitable lender)
- Maternity leave: Jane is currently on paid maternity leave and will return to full time work on the 1/1/2010. While on maternity leave she is being paid $750 / week gross and when she returns she will be paid $1,000 / week gross. Jane can return to work earlier if she so chooses.
- Year to date income: John’s Year to Date (YTD) income shown on his payslip is not an accurate reflection of his true income as he was on leave without pay during the entire month of July. He returned to work on the 1/8/2009.
- Pay fluctuations: John works as a mechanic in our remote mining facility and so is working a four week rotating roster. He works 12 days in the first two weeks and only 3 days in the next two weeks. Because of this his fortnightly pay fluctuates, however his pay is regular and predictable. The first fortnight John is paid $3,600 and in the second fortnight he is paid $600 so his total income is $54,600 p.a.
- PAYG contractor: John is on a fixed term employment contract that ends on the 1/6/2010. Although we can never guarantee future employment he is recognised as a valuable member of our team and it is likely that his employment will be ongoing. (Only available from some lenders)
There are many more possible situations where the lender may require a letter from your employer. We always try to discuss your situation with the lender’s credit manager to try to avoid wasting your employer’s time by requesting a letter.
If you are having trouble drafting a suitable employment letter please contact us for assistance.
Do you need help with your home loan?
If you need the services of a mortgage broker to help get your loan approved then why not talk to us at the Home Loan Experts? Please call us on 1300 889 743 or enquire online to speak to one of our experienced staff.