For many people, life doesn’t always follow a straight path. Perhaps you are taking time out of work to care for your family, explore the world, or recover from health issues. Employment gaps are a natural part of many career journeys, but how do they affect your chances of getting a mortgage?
Employment gaps can affect mortgage approval, but they don’t necessarily disqualify you. When a mortgage lender reviews your application, they look for consistent income, your ability to make mortgage payments, and overall financial stability. Addressing employment gaps honestly is key to success.
By understanding how mortgage lenders view employment history and knowing how to address gaps, you can still be approved for a mortgage. This blog will explore what counts as an acceptable gap, how to manage it, and why working with an experienced mortgage broker can make all the difference.
If you’re concerned about how employment gaps might affect your mortgage application, don’t worry -Goldmanread is here to help. Contact us to get expert advice from a mortgage broker that’s unique to your circumstances.
What is classed as a gap in employment?
A gap in employment is simply a time when you weren’t earning a regular income from a job or self-employment. What counts as a ‘gap’ can vary depending on the lender, but anything longer than a month might raise questions.
The good news? Employment breaks are common and a normal part of life. Most potential lenders will look at the bigger picture of your career and finances rather than focusing solely on the gap.
Let’s explore some common reasons for taking a career break and how they’re viewed by lenders.
Maternity leave
Maternity leave is one of the most common reasons for stepping away from work, so most mortgage lenders are familiar with handling it. If you have a set date to return to work and clear plans on how you will manage your finances during your time off, it will put prospective lenders at ease.
Career breaks
Taking a career break to retrain or explore new passions is increasingly common. If you have previously taken a break and have returned to steady employment, it shouldn’t affect your chances of getting a mortgage.
Getting a mortgage during a career break might be a bit more challenging. Lenders will want reassurance of your ability to make repayments and will look at your overall financial situation.
If you have a solid plan to return to work or can show that you’ve made other arrangements to provide an income during your break (e.g. through savings), many lenders may still approve you, especially if you’ve had a history of stable income before the break.
It also helps to explain the reason for the break and how it might benefit your career progression and long-term stability, for example, if you are studying for a professional qualification. Many lenders consider professionals like doctors and teachers very favourably due to the opportunity for steady career progression.
Sabbaticals
Like extended career breaks, brief sabbaticals are becoming more popular as people look for space to recharge, reflect and develop their skills away from work pressures. The key difference is that if you are on sabbatical, you are likely to have a fixed date to return to your previous role, which will be of reassurance to lenders.
Caring for family
Stepping back from work to care for young children or elderly relatives is a very valid reason to step away from your job. Lenders are generally sympathetic, particularly if you’ve since returned to employment or plan to in future. Joint mortgage applications can also help boost the chance of approval in this scenario.
Health or medical issues
Life can be unpredictable, and unfortunately, some find themselves facing health challenges which force them to take time off work. If you’ve had to stop work due to medical reasons, it’s important to provide an explanation to potential mortgage lenders backed up with a letter from your doctor or medical team. This helps prove that your time away from work was an exceptional circumstance in an otherwise stable career history.
Redundancy
Going through redundancy is tough, and it can feel like a setback, but it’s something many people experience at some point in their careers. The good news is that the majority of lenders will consider your current situation – like whether you’ve found stable work or have a steady income – rather than the redundancy itself.
As long as you can show that you’re back on track, lenders will likely be understanding and willing to move forward with your mortgage application.
Travelling
Extended travel or a “gap year” might make the mortgage process a bit trickier. However, if you can show that your trip was pre-planned, that you plan to return to work (or already have), or you have built up savings that could cover the mortgage repayments, most lenders will take it in their stride and consider you.
Contractor employment gaps
If you are looking for a contractor mortgage, gaps in your employment history don’t have to be a dealbreaker. If you supply clear documentation of your contracting history showing your self-employed income, with proof of a steady employment history and future contracts, it’s still possible to get a mortgage. Partnering with an experienced mortgage broker who has access to specialist lenders can really help.
Do mortgage lenders check employment history?
Your potential mortgage lender will certainly review your employment history as part of your mortgage application. They are looking for evidence of a stable employment income, which, in their eyes, is the best indication of your ability to meet the mortgage repayments.
When considering your employment history, lenders may look at the following:
Employed income:
- Payslips: Recent payslips are the most common way to check your salary.
- P60: This annual summary of your earnings and tax contributions may be requested.
- Employment contract: If you’re employed in a permanent or long-term role, an employment contract will confirm your salary, job stability, and employment terms.
- Bank statements: Lenders may also review your bank records from the past three to six months to check that your salary payments match your payslips.
Self-employed income:
- Annual accounts: If you’re self-employed, lenders will ask for your annual accounts to prove your income over a full year.
- Business bank statements: To show your business income and outgoings.
- Dividend income statements: If you are a company director receiving dividends from your business, you must provide the relevant documentation.
- Contracting history: If you’re a contractor, lenders will likely ask for a record of your contracts, including start and end dates.
These documents help provide a picture of your financial situation so that lenders can assess your ability to make monthly repayments.
Most lenders will focus on your recent work record, particularly the past two to three years. This is why continuous employment or addressing frequent employment gaps is essential for securing mortgage loans.
How much does job hopping affect the chances of getting a mortgage?
Lenders value stability above all, and so job hopping will raise concerns for some – but it’s not necessarily a dealbreaker. If you can prove that you have frequently changed roles to advance your career or have moved between self-employed contracts, that will often be enough to satisfy lenders. A good credit score can help in this type of scenario, so it’s important to check yours before making an application.
How to address employment gaps with mortgage lenders
Honesty is the best policy when it comes to any gaps in your employment history. Here are a few pointers on how to deal with it to improve your chances of approval:
- Provide supporting documents: For example, letters from employers, job contracts and medical records.
- Prove your financial stability: Provide evidence of good financial management, such as your bank records and savings accounts.
- Work with a mortgage specialist: An experienced broker can help you present your employment history in the best possible light.
- Focus on other strengths: A good credit score, low debt-to-income ratio, and proof of other income streams are strong compensating factors.
Should I work with a mortgage broker if I have employment gaps?
If you have employment gaps, partnering with an experienced mortgage broker can make all the difference. They have a deep understanding of the lending criteria of different mortgage providers and are not tied to any particular lenders, meaning they can present you with the best deal for your circumstances.
Working with a broker is especially helpful for contractors or self-employed people with gaps in their contracting history, as they can help you prove self-employed income and recommend you to specialist lenders. Read more about getting a self-employed mortgage.
Talk to an independent mortgage specialist today
If you are looking for a mortgage but are concerned about gaps in your employment record, contact Goldmanread to speak with an experienced mortgage broker. We have lots of experience dealing with homebuyers in your circumstances and can help you find the best lenders for your needs.
