How long will you be receiving workers’ comp?
Injuries or illness sustained on the job that prevents you from working can be both emotionally and financially devastating.
Luckily, businesses with 5 or more employees are required to carry workers’ compensation so you’re protected in the event something happens.
So if you’re currently receiving benefits, which lenders will approve a home loan with workers’ compensation?
How much can I borrow?
Depending on your overall situation, you may qualify for the following:
- Borrow up to 95% of the purchase price: This is on a case by case and the workers’ compensation must be permanent for at least 5 years.
- 100% of income protection payments: Some banks will only accept 50% of income protection payments but some of our lenders will use 100% of this income (conditions apply).
- Shorter loan term applies: The home loan must be paid by the time your retire and stop receiving payments. Alternatively, you can provide the lender with a financial planner-approved exit strategy so you have a chance at qualifying for a longer loan term.
- Refinance your mortgage: Depending on your injuries or illness, we can help you to refinance your mortgage and access equity to renovate your home to meet your needs. This includes building ramps or installing railings.
- Permanent disability: The lenders will be more likely to accept this type of income.
- Temporary disability: Considered on a case by case basis depending on the nature of the injury or illness.
Call us on 1300 889 743 or complete our free assessment form and discover if you can get approved for a home loan with workers’ compensation.
What do I need to provide the bank with?
Lenders will typically need to verify the payments that you’re receiving with payslips and official letters or statements from your WorkCover provider and employer.
Some lenders require that the documents clearly state that allowance is discretionary and not allocated for specific living expenses or medical costs (depending on your injuries).
A couple of lenders can simply use bank statements showing salary credits plus PAYG however, you must be returning to work within 2 months from the date of your home loan application and the maximum amount you can borrow is 80% of the purchase price.
No matter what, most lenders will require a letter from your WorkCover insurance provider confirming:
- The date you expect to return to work.
- Your employment status such as being in full time, part-time or casual employment.
- The salary that you expect to receive when you return to work.
How long will you be receiving the payments?
The period for which you will be receiving workers’ comp and the circumstances around when payments will stop is a key question that all lenders will.
Workers’ comp is generally paid out in stages although this varies from state to state.
For example, if you qualify for workers’ compensation in New South Wales, you will receive weekly payments for the first 13 weeks based or the lesser of 95% of your pre-injury average weekly earnings minus your current weekly earnings.
This will be minus any current weekly earnings and the value of any deductible amount. You will also benefits related to medical costs and other health-related expenses for injuries sustained at work.
From weeks 14 to 130 (2.5 years), this generally drops to 80% of your pre-injury income.
From weeks 131 to 260 (5 years), your payments will actually stop unless you can provide medical evidence that the incapacity will continue indefinitely.
Under the workers’ compensation policy, permanent disability or impairment is defined as the illness remains unchanged despite continuous medical treatment. Once deemed permanently disabled, you will be paid a lump sum benefit in addition to your weekly benefits.
To continue to receive payments after 5 years, you will be again asked to provide evidence that you have no capacity to work in order for you to continue to receive workers’ comp.
You also have to show that your level of impairment is more than 20%. That means your injury or illness has resulted in you dropping to part time or casual work and you’re missing out on more than 20% of your previous average weekly wage.
Ultimately, workers’ comp benefits will stop when you reach retirement age or up to 12 months after reaching retiring age.
Again, this is only true for NSW so you should check with your own workers’ compensation authority in your own state.
Complete our free assessment form and let one of our brokers properly assess your situation so we can find a lender that will approve your home loan with workers’ compensation.
Do you have plan when payments cease?
This comes down to having a solid exit strategy that you’ve discussed with your financial planner. This will be something the lender will want to know.
It could be that you’re going to be returning to work on the same income.
Alternatively, you may be going on a disability pension or claiming your own personal income protection insurance or total and permanent disability insurance cover.
You should speak to your financial planner about an exit strategy in order to qualify for a home loan with workers’ compensation.
What if my workers’ compensation will cease before 5 years?
Some lenders may still accept part of this income as long as you have a solid exit strategy or will eventually be returning to the same job on the same salary.
Can I borrow more if I claim income protection as well?
In the event of an income protection claim being paid, the majority of insurance policies will offset any other benefits that may be payable.
That means you can’t simply receive more than you were when you working your normal job.
Who handles workers’ compensation claims in my state?
Each state and territory have their own regulator that administers and gives advice on workers’ compensation.
As of 1 September 2015, WorkCover NSW has been split into three separate bodies:
- The State Insurance Regulatory Authority (SIRA) for workers’ compensation regulation.
- SafeWork NSW for work health and safety regulation.
- Insurance and Care NSW (icare) for workers’ compensation insurance.
The other states and territories are as follows:
- WorkSafe ACT
- NT WorkSafe
- WorkCover Queensland
- ReturnToWork SA
- WorkCover Tasmania
- WorkSafe Victoria
- WorkCover WA
- Comcare (Commonwealth)
Do I qualify for a home loan with workers’ compensation?
We’re experts in unusual income types like workers’ compensation!
Call us on 1300 889 743 or complete our online enquiry form to speak and tell us about your situation. Otherwise, you can simply fill in our free assessment form and one of our mortgage brokers will get back to you.