A letter of employment is a document written by an employer verifying the pay received by an employee. It may be required for a mortgage application.
When you apply for a home loan, the lender will need documentation of your earnings. Typically, your payslips, tax returns, group certificates, or a NoA are enough. However, a lender may require a letter of employment for a mortgage to verify your income or proof for the other documents you have provided.
Typically, a letter of employment will include your name, employment status and information about current salary, position and responsibilities. It may also state the date when the person started working for the employer as well as how long they plan on staying with that company. Banks typically require this document as part of their mortgage applications.
Unlike most letters of employment, this one is written out by the employer and not the employee. The letter should be written on company letterhead by a human resources officer, accountant or payroll officer.
Make sure you have something in writing from the lender asking for a letter of employment before going to your employer with this request. If you ask them first, they might say no if it’s not required. However, there are good reasons for employers to provide proof of employment upon request by an outside party: - It saves time - They want to help their employees - It opens up other career opportunities When presenting it to the banking institution, take along proof that you work there as well (passport, identification card, etc). Make sure all documents are legible typed out or printed off so your potential lender can read them easily.
If you currently live overseas and are requesting a home loan for your Canadian property, you will need to provide proof of income from within Canada as well as an employment letter from overseas showing you earn money outside the country.
The letter of employment for Mortgage should include the following details:
-- Full name and address of the recipient (i.e., Your Name)
-- Information about how you receive your income – e.g., “your salary”, “monthly net remuneration”.
-- The period during which you were employed – e.g., "from July 1, 2021 to present.
-- Amount(s) of money earned – this can be a specific number or an estimated amount, e.g., “$60,000” or “$90,000 per annum.
-- The name and address of your employer – e.g., “ABC Co Ltd, Address1”
-- If you have been employed for a short period of time you can ask your employer to write a letter stating the length of your employment up until the date of the letter.
For security purposes, it is advised that you ask your employer to write you a letter on company letterhead paper with their business stamp, which should indicate their address and phone number in case there's any sort of problem or more information is required. If you are still employed, use your latest payslip as proof along with the letter.
The bank will ask for a letter of employment if they can't verify your income from your tax returns and other documents and even otherwise. It will allow them to have complete confidence in your ability to repay the loan. They may also request a copy of this letter every year until the mortgage is repaid.
So whether you're applying for a mortgage or not, it's always a good idea to ask your employer for their support.
It is also advisable to mention the reason why you want this letter; you can say that it will help your application and provide them with specific details about the application process. Keep in mind that if they see any issues, they may hesitate to write the letter, so explain how it will benefit them as well.
Include your name, address and the date on your letter of employment for mortgage. You can use a template from any word processing website or simply type out a document in Microsoft word. Make sure you double check all information before sending it off.
Example of employment letter for Mortgage application:
To Whom It May Concern:
Re: John Smith
We confirm the following details regarding John Smith’s employment with ABC Ltd:
His salary is $80,000 per annum gross.
His net salary is $60,760 per annum (only some lenders require the net salary).
He is employed on a permanent full time basis.
He started working with us on 1/1/2021.
He is not on probation.
We would be more than happy to provide any further information upon request. Regards,
ABC Co Ltd.
-- Name and Title of the person signing the letter (if applicable)
-- Address for correspondence (if applicable)
Will the bank accept employment letters from a foreign company?
If you’re employed by an overseas company, some lenders may accept a confirmation of employment if it’s written in an acceptable format. They may also also ask for all or some of the following evidence:
A copy of your employment contract
Two consecutive payslips
Three months of bank statements showing your salary being deposited into your account
Tax returns for the last financial year
It all depends on the lender!
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Disclaimer: The information contained in this article is intended for informational purposes only and should not be construed as professional advice.