In the wake of the coronavirus pandemic, the Australian government has made it a priority to help keep people afloat during these uncertain times. So far, we’ve seen this mainly reflected in both JobKeeper payments and the early release of superannuation.
There are currently 3.5 million people enrolled in the JobKeeper program, which is just part of the reason why the government has extended its support for an additional six months until March 2021. While the number of enrollees is expected to drop by 1.4 million, the sheer utilisation speaks volumes as to how important this financial aid has been to families all over the country.
The benefits for those affected by COVID-19 are undeniably vital for many people, including those who have lost their jobs or have no other source of income. Yet there are some Australians who are claiming payments when it isn’t strictly necessary. And if you’re applying for a home loan in the near future, doing so could negatively affect your loan application.
While the JobKeeper program is ostensibly a win-win for everyone, there have been some repercussions that people aren’t necessarily aware of. Most notably, we’ve seen lenders shift their criteria for home loans.The eligibility criteria for new home loans and refinancing lending has become more stringent, as banks have increased the scrutiny around an applicant’s details, especially in relation to COVID.
Some lenders have even point-blank refused to accept applications from those relying on JobKeeper payments as they view them as in financial hardship. While these payments can help people recover faster than they would without the assistance, it may not be in enough time to keep up with regular mortgage payments as it’s not an ongoing stable income.
However, there are lenders who have adapted to the changing landscape and in some instances will actually recognise Job Keeper payments. For those lenders who are recognising this income, additional documentation will be required to closely evaluate applicants’ situation, including:.
Lenders will also want to know if your working hours have changed or are likely to change in the future, how your JobKeeper income compares to your pre-COVID income, and whether you’re receiving a salary from your current employer. If you’ve kept the same hours but experienced a slight percentage drop in salary, your application will be processed differently than someone who’s hours were cut from 40 to 15. Even if you are not currently receiving any payments, you will have to answer additional questionnaires about the stability of your income and if you can foresee any changes in the future relating to the impacts of the pandemic.
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The federal government has made it possible for eligible Australians to access up to $20,000 from their superannuation. Under the terms, the program allows for up to $10,000 withdrawal from 20 April 2020 to 30 June 2020 and an additional $10,000 between 1 July 2020 and 31 December 2020. As with the JobKeeper program, it was designed to help people who were struggling during COVID-19.
But as tempting as accessing your super might be, it can have a major impact on your retirement. The Association of Superannuation Funds of Australia (ASFA) predicts that single people will need retirement savings of $545,000 and couples will need $640,000.
Those who expect to be working for several more decades may not necessarily be concerned about earning the money back, but it’s important to think long-term before withdrawing anything, especially when you miss out on the compounding interest you could have earned if you had left it alone.
In addition, there are several other factors to consider. What happens if you decide to retire early? Or can’t work anymore due to an injury? Or decide to leave work to pursue further education? The answers to these questions may make it easier to seek out other sources of income whenever possible, especially if you’re planning to use the withdrawal to buy a home. Even more so than Job Keeper payments, banks are treading very carefully when it comes to applicants that have accessed super early as there generally is a direct correlation with a drop in income. It is more important than ever to speak to your accountant or Shore Financial mortgage broker about the potential repercussions of tapping your super early if it’s not 100% necessary for you. Some people are under the impression that the funds would be better used for a home loan deposit, however, it’s almost impossible to have them accepted by a bank for this use.
There’s no doubt that the initiatives described above are a huge help to Australians everywhere in these difficult times. You have every reason to take advantage of the available assistance if you’re struggling right now. However, there are some people who would be better off turning these benefits down, even if they’re technically eligible for them.
The good news is there are alternatives that you can still turn to that might not hurt your application. For example, first-time homebuyers can now buy modest homes with just a 5% deposit — without having to worry about the additional fee of mortgage insurance. The NHFIC will guarantee up to 15% of the property price to make it easier to afford the mortgage.
There’s no shame in taking the help that’s offered, but you might be looking in the wrong place if you’re looking to use these funds to purchase property. If you’re looking for a trusted expert in the market right now, one who has the most up-to-date facts on how your finances will be impacted, call Shore Financial today.