Mortgage Basics

Can You Change Jobs Before Your Mortgage Closes in Canada?

Can You Change Jobs Before Your Mortgage Closes in Canada?
Written by
  • Ashley Howard
| 28 November 2023
Reviewed, 28 November 2023

Table of contents

    The excitement of a new job opportunity can be overshadowed by concerns about its impact on your mortgage approval. In Canada, changing jobs before your mortgage closes can potentially impact your application process and closing date. 

    It’s important to understand how this decision can affect your mortgage closing before you make a career move that could jeopardize your homeownership dreams. 

    This post will look at the implications of switching jobs before your mortgage closes, clarifying what lenders look for during the closing process and how you can navigate changing jobs while closing on time.

    Key Takeaways

    • Any change in employment will impact your mortgage closing.
    • A job change could result in your approval being delayed or even pulled.
    • It’s advisable to change jobs and complete any probationary period before starting the mortgage application process.

    Understanding the Impact of Changing Jobs Before Mortgage Closing

    Changing jobs before your mortgage closes in Canada can significantly affect your approval. Lenders assess your creditworthiness and your ability to make consistent mortgage payments. Changing jobs may affect the stability and reliability of your income, which are crucial factors in the mortgage approval process.

    Moreover, some lenders may require a minimum employment history or tenure in your current job as part of their lending criteria. Changing jobs before your mortgage closes could disrupt this requirement, leading to delays in the approval process or having your approval pulled altogether.

    Understanding the specific requirements and guidelines of the lender you’re working with is essential to ensure that changing jobs won’t adversely impact your mortgage application.

    Factors to Consider When Changing Jobs Before Mortgage Closing

    Before deciding to change jobs while in the process of getting a mortgage, it’s important to consider several factors. 

    • First, assess the impact of the new job on your financial stability. Will the new role offer a similar or higher income level? Are there any probationary periods or uncertainties regarding the new employment that could affect your ability to meet lending criteria?
    • Additionally, consider the industry and job stability. Some industries may be perceived as more stable than others, and lenders may consider this when evaluating the impact of a job change on your mortgage application. It’s also crucial to assess the potential for career advancement and long-term stability in the new role, as this can provide lenders with confidence in your ability to maintain consistent income.
    • Finally, factor in the location of the new job. If the new role requires a significant relocation, it could impact your mortgage application, especially if you’re in the process of securing financing for a specific property.

    Impact of Employment Stability on Mortgage Approval

    Employment stability is a key consideration for mortgage lenders in Canada. Lenders typically prefer to see a consistent employment history and a stable source of income when assessing mortgage applications. Changing jobs before your mortgage closes can raise concerns about employment stability, especially if the new role represents a significant departure from your previous industry.

    It’s important to communicate openly with the lender about your employment history and any planned job changes to ensure you meet the mortgage approval criteria at the onset of your application process.

    Communicating Job Changes to Your Mortgage Lender

    Open communication with your lender is necessary when considering a job change well before your mortgage approval is granted. Transparency about your employment situation can help mitigate potential concerns and provide lenders with the information they need to assess or reassess your mortgage application. Typically, a reassessment may include the following:

    1. Reassessment of your application once your new employment’s probationary period is past. If no probationary period is provided on your job acceptance letter (JAL) or letter of employment (LoE), then the lender will use their lending criteria to make their decision. Most prime lenders will include a 3-month waiting period for private industry or a 6-month waiting period for public service jobs as an unwritten probationary period.
    2. Underwriting your application only with your spouse, co-signer’s or guarantor’s income alone.
    3. Your application being declined due to risk assessment if your application is for an uninsured mortgage as the risk of default solely rests on your lender.

    Before deciding to change jobs, you should inform your lender and seek their guidance on how this change may impact your application. They can provide insights into their specific lending criteria to evaluate applications and offer advice. This should be undertaken at the preapproval (before your offer is approved, with a rate hold) or prequalification (understanding how much your mortgage you can qualify for) stage of your application to avoid losing your deposit if your home purchase offer has already been approved.

    By proactively addressing job changes with your mortgage lender, you demonstrate responsibility, transparency and a commitment to ensuring a smooth mortgage approval process, potentially minimizing any negative impact a job change may have on your application.

    Tips for Changing Jobs While in the Process of Getting a Mortgage

    If you’re contemplating a job change while in the process of securing a mortgage, there are some tips to consider to help minimize potential adverse effects on your mortgage application. 

    Try to avoid changing jobs once your mortgage has been approved. Switching jobs after approval has been granted is a contravention of your mortgage contract, as income verification conditions are outlined on your mortgage contract that you have signed off before having your mortgage instructions readied for your solicitor or notary. If a job change is unavoidable, aim to secure the new role and complete the probationary period before starting the mortgage application process. 

    Potential Risks and Challenges of Changing Jobs Before Mortgage Closing

    While changing jobs before your mortgage closes can present career advancement and personal growth opportunities, it’s important to consider this decision’s potential risks and challenges. One of the primary risks is the impact on your mortgage application and approval process.

    A job change can introduce uncertainty and may lead to delays or your approval being pulled. It’s crucial to weigh the potential benefits of the new job against the risks it may pose to your mortgage approval, ensuring that the decision aligns with your homeownership goals. Furthermore, if the new role has a probationary period, this could be a deal breaker for some lenders. Additionally, if your mortgage qualification requires any bonus or commission income, a two-year average is required to capture this higher income for qualification purposes.

    Seeking Professional Advice From a Mortgage Broker or Agent 

    Navigating the complexities of changing jobs before your mortgage closes in Canada can be challenging, and seeking professional advice from a mortgage expert can guide you. A knowledgeable mortgage expert can assess your specific situation, including the potential impact of a job change, and provide tailored advice on how to proceed. They can offer insights into the lender requirements, potential challenges, and strategies for mitigating any adverse effects on your mortgage application. 

    Typically, this advice will entail seeking out a subprime mortgage at a higher cost; therefore, it is crucial first to consider and quantify exactly how much you want this job in dollars and cents compared to the home that you’re purchasing. Is it worth paying 4 to 7% more on your mortgage payments for 1 to 2 years at a B lender before you can qualify to refinance at lower prime lending rates?

    Legal and Financial Implications of Changing Jobs Before Mortgage Closing

    Changing jobs before your mortgage closes can have legal and financial implications that warrant careful consideration. If you walk away from your new home purchase, you could lose your approval, and if you are unable to find a lender to qualify and close on time, you could be on the hook for any loss of value to the seller, alongside legal costs. It’s critical to consider the financial impact of losing the home, your deposit, and possible additional legal costs associated with a nulled closing.

    Frequently Asked Questions

    When does a job change have no impact on my mortgage application?

    When a mortgage application is not needed, such as for a mortgage renewal, it should have no impact on your ability to renegotiate your mortgage rate on a new term with the same lender.

    When does a job change impact my mortgage renewal?

    A lender could be prompted to reassess that your employment meets their lending criteria should you miss any payments on your uninsured mortgage (HELOC or another form of combined mortgage loan), or a credit check indicates that your credit score has significantly fallen since the onset of your mortgage. Creditors reserve the right to check your credit history with a soft credit check from time to time if you have credit facilities with them. A soft credit check does not impact your credit score.

    Can a job change impact my mortgage after approval?

    Yes, a job change can impact your mortgage approval, as the outstanding conditions on your mortgage contract must be true when signing with your lawyer/notary. If an underwriting condition is untrue after approval, then your solicitor, who also represents your lender, is required to inform your lender about a change to the condition(s) on your mortgage contract. This can jeopardize your mortgage closing as your income no longer meets the income verification conditions outlined in your mortgage contract, as verified by your lender.

    What can I do if my mortgage application or approval is declined due to a job change or job loss?

    You could ask parents or next of kin who have the financial means to co-sign (they will go on the title, and only a refinance can remove them from the title) or be a guarantor (they will not go on the title, cheaper and easier to renew or refinance later without them) your mortgage. It’s advisable to seek professional advice from a legal expert before proceeding with a remedy.

    If you cannot find a solution with a prime lender, you will need to work with a mortgage broker or mortgage agent to help you with subprime or private mortgage financing to qualify for your mortgage. This will be done to avoid losing your deposit or possibly being sued by the seller.

    Final Thoughts 

    Navigating a job change while in the process of getting a mortgage in Canada requires careful consideration of the potential impact on your mortgage application. Understanding how employment stability, income reliability, and lender requirements on your approval are all connected will help you determine the right time to make a career move. 

    Ultimately, individuals considering a job change before their mortgage closes should quantify and weigh the potential benefits of the new job against the risks and challenges it may pose to their homeownership aspirations. By approaching the decision carefully and proactively, you can confidently navigate this complex scenario and ensure a seamless transition into a new career and homeownership.

    By assessing the factors at play, communicating openly with your mortgage lender before you have completed your purchase, and seeking professional advice, you can effectively navigate the complexities of changing jobs before your mortgage closes. Are you considering a career move while qualifying for a mortgage? Contact our mortgage experts for tailored advice.