Mortgage after a job change: what lenders look at

A new job does not prevent borrowing

Changing jobs around the time of a purchase, a renewal or a refinancing worries many people. They imagine a file with a new employer will be refused automatically. That is not what the general rule says: a new job does not prevent borrowing. It simply changes what the lender wants to see to feel comfortable with the stability of your income.

The lender does not judge your decision to change jobs. It asks whether the income that will be used to repay is predictable enough for the whole life of the loan. Some changes reassure (a comparable permanent role in the same field), others call for more explanation (a short contract, commission-based pay, a complete career change).

This article describes what lenders generally look at, the documents to prepare and the questions to ask. It contains no thresholds and no rates, because criteria vary from one lender to the next and change over time. An authorized person, registered with the Autorité des marchés financiers (AMF), can apply these rules to your file.

What the lender really looks for

At bottom, three things: the stability of your income, its likely duration and your ability to repay. Tenure with the employer matters, but it is not the only criterion, and one lender is not necessarily as sensitive to it as another.

To judge stability, the lender generally looks at the type of job, the sector, your experience in the field and the nature of your pay. A fixed salary is easier to read than variable pay. To judge duration, it asks whether the position is permanent, fixed-term or tied to a project. To judge capacity, it compares confirmed income with your debts and monthly obligations.

It also looks at the rest of the file, which can offset or heighten an uncertainty: your credit history, your down payment, your savings and the strength of your other income, including that of a co-borrower.

Keep in mind that the decision rests on the whole file. A single element, such as a recent hire date, almost never decides on its own, but it can trigger additional questions.

Probation, contracts and commission

Not all jobs are assessed the same way. A permanent position on probation, a fixed-term contract and a commission role each raise different questions for the lender.

For a permanent position on probation, some lenders accept the file with an offer letter; others prefer to wait until the probation ends. For a fixed-term contract, they ask whether it is likely to be renewed and whether renewals are common in your sector. For commission or bonus pay, they often look at income over a longer period rather than just the latest month.

These practices differ between lenders and evolve. There is no universal answer, which is why asking before you apply is preferable:

• what type of job do you accept, and under what conditions?
• do you require probation to be over?
• how do you calculate variable income?
• is a letter from the employer confirming the position enough?

Ask for the answers in writing: they spare you unpleasant surprises at final approval.

Same field, career change, self-employment

A move to a comparable role in the same field is often viewed more favourably than a complete career change. The lender sees continuity: your skills and prospects are known, and the risk of an interruption in income looks lower.

A change of field is not an insurmountable obstacle, though. It simply requires explaining the logic: training completed, a permanent role obtained, income confirmed in writing. The better the file documents the transition, the less room it leaves for interpretation.

Moving into self-employment is a case apart. Lenders then generally look at income over several years, based on tax documents rather than a contract. Someone who has just started out on their own will rarely have the same kind of file as someone who has practised for a long time.

In every case, present the situation frankly. A lender would rather understand an unusual path than discover it during verification. An authorized person can help you present your file to those that seriously consider this kind of profile.

Documents to prepare

Documents confirm what you state. The more complete and consistent they are, the faster the processing. The exact list varies by lender, but it generally includes:

• the offer letter or employment contract, showing the position, status and pay;
• recent pay stubs;
• last year’s notice of assessment and sometimes those of earlier years;
• bank statements showing salary deposits;
• a letter from the employer confirming probation is over, where applicable;
• your employment history for the past few years.

Before handing them over, check that they match: the position on the letter, the amount paid and the employer’s name must line up. An inconsistency, even an innocent one, delays the file.

If you are still waiting for a document, such as your first pay stub, say so from the start rather than leaving the file in limbo. It is generally not a problem as long as the lender knows what is missing and when it will arrive.

Before changing jobs

If a purchase or a renewal is near, the ideal time to ask your questions is before you sign the new job offer. At that stage you still have all your options, and a discussion with an authorized person can inform your decision.

A few useful reflexes:

• note the maturity date of your mortgage or the planned date of your purchase;
• ask the authorized person whether the timing of the change affects your file;
• if possible, negotiate a start date with the new employer that fits your plans;
• avoid stacking changes in the same period: a file that moves too much needs more justification.

The point is not to give up a good professional opportunity, but to know its financial consequences before committing. If the change has already happened, it is not a catastrophe: you simply prepare the file accordingly.

In every case, the job decision is yours. The approach is only about not being surprised by a question you could have anticipated.

A hypothetical scenario

Imagine a person we will call Léa, who has worked in the same field for several years. She receives an offer for a comparable role with another employer, with a probation period, while her mortgage is approaching maturity and she is thinking about refinancing.

Before accepting, she consults an authorized person and lays out the situation. That person explains that some lenders accept a file with the offer letter, while others prefer to wait until probation ends. Léa decides to negotiate a start date that gives her time to act, and then to gather her documents.

She prepares her offer letter, latest pay stubs, notices of assessment and statements. She asks lenders in writing what they require for a position on probation. That lets her compare complete conditions rather than discover the requirements along the way.

This scenario is fictional and guarantees no result. It illustrates an approach: anticipate, document, ask questions before signing. The final decision is Léa’s, just as approving or declining is the lender’s.

Mistakes to avoid

A few mistakes come up often when a job change meets a loan plan.

• Not reporting the change while an application is under way: an unreported change can lead to a refusal, even to the cancellation of an approval.
• Changing jobs between approval and closing without saying so: the lender often verifies employment before releasing funds.
• Believing a higher salary settles everything: it helps, but stability and proof count as much.
• Submitting inconsistent or incomplete documents, which delays the file.
• Relying on a lender’s verbal answer without having it confirmed in writing.
• Multiplying credit applications in several places without knowing what each means for your history.
• Waiting until the last minute when a renewal date or a closing date is near.

None of these mistakes is irreparable, but they add up. A conversation with an authorized person, registered with the AMF, helps you spot them before they cost time or opportunities.

What an authorized person can do

An authorized person registered with the AMF can read your file the way a lender would and tell you, before you apply, which parts may raise questions. They can also approach several lenders, explain how each treats a job on probation, a contract or variable pay, and tell you what documents to prepare.

They cannot promise an approval, and nobody should. What they can do is save you from applying blindly, which matters because several applications in a short period leave traces on your credit history. Ask them to explain in plain words why a lender might hesitate, and what could be added to the file to answer that hesitation honestly.

CompareTaux plays no part in that analysis: it shows no rates and makes no decision, it only routes your request to an authorized person.

Questions to ask and checklist

Before meeting an authorized person or a lender, prepare your questions and your documents.

Questions to ask:

• is my type of position accepted, and under what conditions?
• is the end of probation required?
• how will my income be calculated if it is variable?
• which documents are needed, and how many years of history?
• what checks will be repeated before closing?
• what happens if my job changes between approval and signing?
• can these answers be confirmed in writing?

Checklist:

• up-to-date offer letter or contract;
• recent pay stubs;
• notices of assessment;
• bank statements;
• a short summary of your employment history;
• maturity or closing date noted.

Tick each item before the appointment. You will save time, and the conversation will focus on your situation rather than missing paperwork. Finally, check that the person appears in the AMF register.

Frequently asked questions

Sources

• Financial Consumer Agency of Canada
• Canada Mortgage and Housing Corporation (CMHC)
• Autorité des marchés financiers: public information
• Canada Revenue Agency