Can you change jobs before your mortgage closes?

Life can be unpredictable: a new path can light up, a door to a new opportunity can open, or bad news can hit, whether it’s a good time or not. Life happens, but it can make the mortgage application process tricky. 

While there are occasions to celebrate–like when you’re approved for a mortgage, when you’ve put an offer in for a home, and again when your offer is accepted–you have to remember that your mortgage isn’t final until you close on your home.

And, when it comes to getting a mortgage in Canada, your employment history and income are two of the most important factors your mortgage lender looks at when reviewing your application. When there are changes to your employment, whether you're in the driver’s seat of the change or a passenger, your mortgage could be at risk if this change happens before you’ve closed on the home.

While every situation is unique and you’ll be assessed based on your unique circumstances, it’s generally recommended not to change jobs during the application process or before your mortgage closes. 

There are some cases, however, when a change in employment usually will and usually won’t impact your mortgage.

When changing jobs doesn’t affect your mortgage

Mortgage providers usually look for two years of employment history when reviewing your application history. A two-year history is used to show that you have a stable stream of income and prove you do have the ability to pay your mortgage.

Your mortgage likely won’t be impacted if: 

• You’re promoted at your current job and your income increases at the same time.
• You’ve moved up in your career and are offered a full-time and permanent position with another employer that comes with a higher title and salary

Career moves like these are usually a positive sign to your mortgage lender and demonstrates your ability to maintain a stable career, where you can work your way up. Plus, a move like this won’t normally affect your ability to afford your payments, so your mortgage application usually won’t be at risk.

When a job change can put your mortgage at risk

On the other hand, there are situations where your mortgage might be at risk of being pulled  due to a job change. Specifically, if you happen to be on a probation period for a new role it is highly unlikely your lender can approve you for a mortgage. Other changes that can put your mortgage at risk are: 

• You switch to an entirely different industry or profession. Not only would you likely be in a probationary period, which might add a bit of instability to your income and employment in any job change scenario, but it’s harder for your mortgage lender to be certain that you have job security. 
• You change your pay employment type–like switching from a full-time to a part-time position or from a permanent position to a fixed-term contract.
• You change your income type–like switching from a salaried position to freelance or to a position that is commission or performance-based. These incentive-based pay structures might mean you could have a higher income, but they might also be seen as unstable. In these cases, it’s harder to prove your income and show you can meet minimum income thresholds and that you can still afford your mortgage.

If you do change jobs at any point before your mortgage closes, it’s important to remember you’re legally required to inform your mortgage provider. 

How to get a mortgage without two years of work history

When you’re missing two years of work history–or if, perhaps, you were in school for two years prior to applying–it’s not impossible to get approved for a mortgage. Instead it's important to show your lender that you’ve maintained a steady income over the years and show that you can afford the mortgage you’re applying for. 

For instance, if you’ve moved jobs more than once over a short period of years, or job hopped in other words, you can still prove your ability to manage your mortgage payments by demonstrating that you’ve maintained a steady income and have remained employed throughout that duration of time. 

In other cases, it will be beneficial to have a strong and high credit score, while also offering up a larger down payment to secure your home.

While it’s not impossible and options are available, it’s important to note that the interest rates you qualify for might also be impacted. Be prepared with the possibility that you might qualify for a mortgage with a higher interest rate without a two year work history than you would have if you had that history.

Before making changes, we recommend talking through your options with your mortgage provider to work through the decisions you have to make. At Pine, our advisors will talk through all the options at your disposal and the potential impact of each to help you make the best decision you can, and ensure your home buying journey is stress-free and hassle-free.