Can a second job help you when it comes to getting a home loan from the bank? The answer is yes. A second job can definitely help you secure a bigger mortgage and according to Aseem Agarwal, Head of Mortgages at Global Finance having more than one job is becoming a more common scenario.
“On average almost 20% of customers are holding down more than one job in order to meet the bank’s lending criteria”. Assem adds that with the cost-of-living crisis and stricter lending criteria, holding multiple jobs is more common than what it was before the pandemic.
Professor Gail Pacheco, director of the NZ Work Research Institute at Auckland University of Technology, was quoted on NewsHub stating that “around 7 percent of workers hold multiple jobs.” Data from Stats NZ further reinforces this, revealing that “216,300 Kiwis supplemented their nine-to-five in the June 2023 quarter.”
The most common situation was to be self-employed, Brad Olsen chief executive at Infometrics tell us. That applied to 51% of those with a second job. Another 35%, or 72,000, worked for someone else in their second job.
What matters to banks when assessing a second job?
When it comes to loan approvals and assessing the viability of a second job, banks evaluate several key factors. As Agarwal explains, “Banks look at aspects such as the number of hours worked, the nature of the work, the sustainability of income, and the security of employment.”
Every situation is different, but generally speaking, if you are relying on working more than 40 hours a week to be able to afford the repayments, the lender will want to make sure that the second job is sustainable. They will want to know that it can be maintained long term and not simply over a short period to temporarily boost your borrowing capacity.
For example, if someone is working 50 hours full time in one job and then another 15 hours in another job, lenders may regard the total of 65 or 70 hours over the lifetime of the loan as unsustainable.
Here are some other factors they consider:
1. How long have you been juggling both jobs? How long have you been self-employed? Is it more than a year? Does your second job entail a probation period or a 90-day trial? If it does, lenders may exercise caution when considering its income contribution. However, if your employment or income stream has been ongoing for a significant period or if there’s no probationary period, lenders may be more inclined to accept the income from this job.
2. How secure and reliable is the company you work for in your second job? Lenders evaluate factors such as company reputation, financial stability, and industry standing to assess the reliability of your employment.
3. What is the nature of your work in both jobs? Is your second job related to your past or current experience, qualifications, or skill set? Is your second job physically demanding or mentally very strenuous? Lenders may consider the potential strain of your work on your overall well-being, health and long-term productivity.
4. If you were to lose your second job, do you have contingency plans in place? Lenders will evaluate your financial resilience and whether you would be able to secure another similar position in the event of a job loss.
5. How reliant are you on the income from your second job to meet financial obligations? Lenders will question your dependence on supplementary income, your financial flexibility and your risk exposure. The y will look at how much of a financial shortfall would you experience without your second income. They will evaluate the gap between your expenses and primary income to assess your capacity to maintain loan repayments.
The cost of working two jobs
Agarwal also mentioned the importance of taking the impact of additional expenses associated with a second job into account, such as transportation costs and childcare expenses. “If you’re living somewhere like Auckland, unless you’re very lucky or work from home, your work won’t be right next door; people will have to drive long distances and sit in traffic to get from job to job”.
How much will they lend?
Once the bank is satisfied with these criteria, they will incorporate the additional income into their assessment to determine the extent to which they can increase the loan amount. Based on their experience as mortgage brokers at Global Finance, Aseem Agarwal tells us a second job typically enables individuals to secure an average loan increase of $50,000 to $100,000.
Tips for success
To be successful in getting that bigger loan, it’s essential you convey confidence in your ability to manage multiple job roles and mitigate potential risks effectively. Lenders look for believability, sustainability, and security.
“Clients should reflect on the practical implications of juggling work commitments, considering factors such as work-life balance and potential fatigue,” he advises. By addressing these factors proactively, you can then present a compelling case to lenders and improve your loan eligibility. And we can help you with that.
Realising your loan potential
A a second job can be a valuable tool when securing a loan and achieving your financial goals. At Global Finance, the team is there to help, guide and support throughout the home loan application process. If you’re looking to take out a home loan and wondering how second job can help you get one, they’re there to help. Reach out to today.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.