What does it mean to be stood down from job?
Due to COVID-19 or other circumstances, an employee stops working and is usually not paid or is working reduced hours and getting paid.
However, they’re still employed and still have entitlements like annual leave during the stood down period.
Being stood down is different from being made redundant or being terminated.
Can I get a home loan after being stood down?
Even though you may have been stood down due to this unprecedented pandemic, there is still a chance for you to get a home loan.
You will need to show them your most recent payslips and ensure that your job is secured after the stood down period ends.
You have to maintain a net surplus figure (i.e. net income minus your commitments, debts and living expenses) during the stood down period so you can make your mortgage repayments without getting into financial hardship.
How to get approved for a home loan when being stood down?
Whether you get approved or not also depends on the overall strength of your home loan application.
A strong mitigant to get approved when being stood down is to provide the most recent payslips and salary statements.
Here are some tips on how to get approved for a home loan when you’re stood down:
- Provide a confirmation letter from your employer that your job is secure and you will return to work. Some lenders might only do an employment check.
- Provide a letter from your employer confirming current income and that you receive income once you’re reinstated.
- Explain that the impact on your income is temporary and only affected during stood down period.
- Confirmation that you will be reinstated to your job within 6 to 12 months.
- Provide the most recent payslips. (within 14 days for some lenders or most recent month if payslip is received monthly)
- Provide the most recent salary credit statement (1 to 3 months of the latest statement with most recent salary credit)
- Until the time you start your job after being stood down, you must show you have enough savings to make repayments on your mortgage. It’s best to provide at least 6 months of savings to cover for any shortfall in the monthly surplus figure.
- Some lenders even accept gifted funds.
- You are a long term employee.
- If you’re receiving JobKeeper payments or reduced payments, then lenders will view this as your employer retaining you as an employee.
- If you do not have enough genuine savings, it’s best to save now and apply for a home loan when you have adequate funds to cover any shortfall.
- Do not apply if you are likely to get into financial hardship.
What if I’m working in an impacted industry?
Due to the coronavirus pandemic, certain industries, professions and businesses have been affected more than others due to social distancing measures and international travel bans.
If your employer has been heavily affected by the coronavirus pandemic, and your job has been temporarily suspended, then your home loan might not be reviewed favorably by some lenders due to their tightened credit policy, especially if you’re employed in these industries:
- Hospitality (cafes, bars, restaurants, hotels, etc.)
- Sports, arts and entertainment (live performance venues, sports venues, casinos, zoos, etc)
Please note that this list is not exhaustive and lenders will consider each application on a case by case basis.
However, our mortgage brokers know how to demonstrate your strength and find a suitable lender for you.
Call our mortgage brokers at 1300 889 743 or fill in our free assessment form.
What if I am working reduced hours?
If you are working reduced hours, the lenders will need a confirmation letter from your employer along with:
- Latest payslips with reduced hours and pay.
- Latest salary credited to your account.
However, if working reduced hours has no effect on your ability to repay the loan, then the application can proceed as normal.
Will lenders accept JobKeeper or other government benefits during stood down period?
There are lenders that will accept JobKeeper and other Centrelink benefits as income when you’re applying for a home loan.
|Income||Is it accepted?||Comments|
If the JobKeeper payment is less than your income before COVID-19, then the $1500 payment received per fortnight will be used to calculate your borrowing power.
If the JobKeeper payment is more than your income before COVID-19, then your income will be used to calculate borrowing power.
|JobSeeker||No||In these challenging times, banks might not accept this payment.|
|Centrelink or other benefits||Yes||Read more on which Centrelink benefits are accepted.|
|Superannuation||Yes||Superannuation is accepted, but a guarantor loan might be a better option.|