There are several pieces of evidence you can present to a lender to prove your income. These include tax returns, payslips and a Notice of Assessment.
Some lenders will also ask you to provide a letter of income to verify the information in those documents. Without one, you may not be able to access some home loan products.
What Should the Letter Contain?
Happily, the requirements for your letter of employment aren’t too difficult to meet. The letter should contain the following details:
- A letterhead that notes your employer’s Australian Business Number (ABN) and contact information;
- The name and signature from your employer;
- The date the letter was written;
- Your name and gross income (some lenders also ask for your net income);
- How long you’ve worked for the employer’
- Your employment status, which is usually either full time, part time or casual, However, you may also work as a self-employed contractor, which your employer will need to mention; and
- Information about any unusual conditions of employment, where relevant.
Most lenders will work with you to get the letter right, so you should be able to amend yours if it doesn’t contain the correct information.
An Example Letter
We’ve created an example letter so your employer has something to work from:
To Whom It May Concern
Re: <your name>
We can confirm these details for <your name>’s employment with <company name>:
- He/she is employed on a <employment status> basis.
- His/her salary is <your salary> per year gross.
- He/she is not on probation. (Your employer may have to change this if you are still in your probationary period. In this case, the employer should mention the end date for the probation period.)
- His/her employment began on <your start date>.
If you require any more information, please contact our Human Resources department on <phone number>.
<Letter writer’s name>
<Letter writer’s department>
Some lenders may ask for your net income, as well as your gross income. Your employer can add this to the bullet points, along with any of the other details we’ve listed in the next section.
The above example covers the major details that most lenders need to approve your home loan application. However, some will ask for further clarification on some details. Again, your employer can add these to the bullet point list in the example letter.
Such details may include any or all of the following:
- Whether you have a company car;
- If you’re part of a salary packaging scheme;
- Any pay deductions, such as those for a superannuation fund;
- Recent changes in income and details about recent promotions;
- How stable your employment status is;
- Information about any overtime income you receive (remember that some lenders won’t accept 100% of your overtime income when considering your home loan application);
- Any details about maternity leave, including the duration and your maternity payments;
- Details about any payslip discrepancies, such as an explanation for any unpaid holiday leave that doesn’t show up on your payslips; or
- An explanation for any other pay fluctuations. For example, you may receive the majority of your monthly income in the first two weeks, with the rest coming at the end of the month.
Not all lenders will require this information, but those that do request it will wait for you and your employer to provide all the information.
You can also work with one of our mortgage brokers to draft the letter. We can help you draft the perfect letter of employment for your home loan application.
What to do next
You now know the details you need to include in a letter of employment. Get it right and you’ll speed up the home loan application process. We also recommend that you do the following:
- Read about the nine steps to follow to become a homeowner.
- Calculate how much money you can borrow.
- Speak to one of our mortgage brokers if you have any questions about your letter of employment.
This information is general in nature, and you should always seek professional advice when making financial decisions.