If you’re an emergency services worker and in the market for a home loan, then recent amendments to lending criteria from the banks spells good news for you.

In this day and age, meeting the extensive lending criteria from credit providers in Australia can be tough, and this is only compounded if you work in certain industries that can be at times stressful, and paired with odd working hours and shifts. However, recent changes to the policies means that it’s now easier to get approved for a home loan if you work in our nation’s emergency services sectors – so what’s changed?

What’s Changed With The Lending Criteria

 While many industry experts have attributed these changes to the recent Royal Commission into the Banking, Superannuation and Financial Services Industry, it’s also arguably linked to the Global Financial Crisis that we faced around the world between 2007 to 2008.

On one hand, many banks have been updating their policies and processes around assessing a person’s ability to repay a loan, reflecting an evolving lending environment, including the prudential regulator’s temporary limits on certain types of loans, and new guidance relating to responsible lending issued by ASIC.

On the other hand, it’s important for banks and other lending providers to always look to evolve, and directly address the changing needs and expectations of customers – the world isn’t the same place that it was ten years ago, and in turn neither are our financial needs or expectations.

For those working in the emergency services sectors in Australia, some of the most recent changes are linked to the lending criteria required to obtain a home loan. From 18 February 2020, the Emergency Services Credit Policy has been amended to help permanent front-line employees of emergency services, such as members of the police force, firefighters, paramedics, nurses and those in the defense force, to apply for a home loan with an increased borrowing power.

Traditionally, the earnings of many emergency services workers include not only their base wage, but also overtime compensations, a medley of shift allowances, and penalty rates. For many, these payments account for a major part of their overall earnings and comprised of a standard income source when assessed over a long period of time.

However, these allowances and wages were previously not accounted for in home loan applications. Deemed too volatile, lending providers only assessed all non-base earnings at 80%. With the latest policy changes to lending criteria introduced earlier this year, emergency services workers have had a win here, and can now have their non-base income and allowances assessed at the full 100%, which in turn increases their borrowing power when it comes to applying for a home loan or mortgage.

Lending providers deem emergency services employees eligible for the full 100% assessment of their overtime and shift allowance earnings include –

●       All active duty, permanent front line fire officers, fire fighters, police officers, ambulance officers, nurses and paramedics currently based at their duty stations.

●       Ideally, all applicants who are employed by the same employer over the previous and current financial year. If the employer has changed within this period of time, previous employment should be in the same role in the same industry (if not, a higher role). The applicant must be able to provide a PAYG summary from their previous employer.

If you identify as one of the above emergency services employees who meets the qualifying requirements, the types of income that are now assessed at 100% include:

●       Overtime compensations

●       Shift allowances

●       Penalty payments

●       Industry specific payments

●       Vehicle allowances

While this spells good news for emergency services workers looking to get into the property market in the near future, it’s still crucial to enter this arena educated, and with the right tools at your disposal – which is where we come in.

Taking The Stress Out Of The Property Market

A completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.

Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.

If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.

Disclaimer

This blog does not consider your financial situation, needs and objectives. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal; tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.