If you are looking to start or expand your family you are probably already considering where you’ll live and how much space you’ll need. You may find that you’re suddenly in the market for a larger place, so how tricky is it to secure a maternity leave home loan?
Knowing how lenders will assess your application before applying is essential in giving yourself the best chance of getting finance. Pre-approval when making property offers is important, not least of all because it allows you to bid with confidence.
When planning for your new home you’ll likely find yourself in one of two positions:
Looking to apply before you start trying for a baby
Planning your home finance at the same time as planning for a baby may save you some difficulty as the bank will consider your application like any other. In other words, your borrowing power will be assessed on your full income.
Although it may be easier to get finance in this scenario it is still important to consider your ability to service the loan when on maternity leave and whether you will return to work in a similar capacity.
Looking to apply whilst pregnant or on maternity leave
If you are looking to get finance once your baby is on the way, or even arrived, your lender will require income, assets and liability assessments to demonstrate how you will service the loan.
Lenders see a maternity leave home loan as higher risk due to reduced income and the chance you may not return to work, however some will approve your application if you meet set criteria.
If you find yourself in this scenario, preparing the following information for your lender will make the application process flow smoothly;
If you are currently on unpaid leave and you require your income to service the loan, the bank will look to see you have enough liquid assets to service the loan in the form of savings.
Being paid on maternity leave may relieve day-to-day financial pressure however it is important to remember that while some lenders will include this full amount in your assessment, some may only consider a portion and others may not include it at all.
You will need to provide evidence of your employment and income in your application which could include:
- Recent payslips (the 2 most recent prior to maternity leave)
- A letter from your employer outlining the terms of your maternity leave. This needs to include your return date, future employment terms and your salary upon return.
- An estimate of childcare and other related costs for when you return to work.
What will the bank consider when assessing my application?
The lender will take into account whether you are on unpaid or paid maternity leave as well as your ability to service the mortgage repayments using:
- Cash savings
- Government benefits (if applicable)
- Monetary gifts (if applicable)
FundingPro can help you navigate through this process, whether you are planning for a baby, pregnant or on maternity leave.
In helping our clients, we’ve noticed some common questions that arise;
Does the length of my leave make a difference?
Most lenders will only consider an application when maternity leave is a less than 12 months. The shorter the leave is, the more favourably they will look at it.
Do I need to let a lender know I am pregnant?
When applying for home finance it is important to let the lender know of any known changes in your financial situation over the coming 12 months. If you do not disclose this information, it could result in an application being denied.
Can I take a break from my repayments while on maternity leave?
Some lenders may include a Repayment Holiday feature in certain mortgage products. This allows you to take a break from your repayments when you leave the workforce. Eligibility generally requires you to have had your home loan for at least 12 months. The process is often similar to applying for new finance in that you will have to provide evidence of employment, income, assets etc. We can help you source a home loan that provides this feature through our network of 70+ lenders.
Will the lender consider any income I receive whilst on maternity leave?
Only a limited number of lenders will consider income you receive whilst on maternity leave. These lenders may also consider the income you will receive when returning to work with the right documentation. Consider your lender’s policies on this, as well any partner’s salary, in the pricing of properties you are searching for.
Similar to planning for a baby, planning your family home finance can be an exciting yet overwhelming process. FundingPro can help you assess your current situation and find you the right home loan quickly so you can concentrate on enjoying this new and rewarding life stage.