Mortgage On Maternity Leave

Having a baby and buying a home are two of the most important milestones in anyone’s life. But unfortunately, checking both of these off your list at the same time can cause a few issues. 

This is because being on maternity leave often means lower wages for a period. Consequently, your eligibility for getting a mortgage may also be questioned by most lenders.

However, that does not mean that getting a mortgage on maternity leave is impossible. 

With rising mortgage costs and the additional expenses of having a newborn, it is important to find a lender who understands your situation. 

And that’s what we’ll be discussing in this guide.

Can I Get a Mortgage on Maternity Leave?

Yes, you can get a mortgage while on maternity leave. While lenders will assess your income, assets, and “temporary leave income”, each lender has their own criteria and some could view “parental leave” as high-risk.

As already mentioned before, getting a mortgage on maternity leave is not impossible, but it can impact approval chances and borrowing capacity and you may need to jump through a few more hoops in order to get your mortgage application approved. 

This is because lenders assess affordability based on earnings, and maternity leave typically means a lower salary, potentially hindering your application.

Hence, finding a lender who understands that your pay is only reduced temporarily is essential. 

We also recommend contacting a mortgage advisor familiar with maternity leave applicants to identify suitable lenders.

What Do I Need To Get A Mortgage On Maternity Leave

Securing a mortgage on maternity leave is a smooth process if your lender is accommodating and understands the temporary nature of your situation. 

However, ensuring them that your regular earnings will resume in the future is crucial.

Consequently, you can prove your affordability of the mortgage by showcasing the following-

• Proof of any additional income sources
• Start and end dates of your maternity leave/estimated return dates to full-time work
• Documentation confirming your savings
• Payslips for both your regular and maternity wages (if applicable)
• Continuation of employment after maternity leave or any anticipated job changes upon your return

If you or your employer is unable to provide the aforementioned information, the application process will become all the more challenging. 

If you are returning to work but returning on reduced hours then this could impact your affordability assessment so always keep this in mind.

How To Prepare for A Mortgage Application While On Maternity Leave

1.  Get A Letter Of Reference From Your Employer

This letter must prove your maternity leave and intention to return to work after a set period. It should also mention the duration of your leave. 

2. Gather Required Documentation 

This includes all the paperwork related to the factors stated in the previous section, such as your remuneration terms, working hours, etc. 

3. Find The Right Lender

An experienced broker can help you identify mortgage lenders who are familiar with such cases and may view your application more favourably. Needless to say, this may help save a lot of your time, effort, and money.

How Much Can I Borrow?

The amount you can borrow for a mortgage on maternity leave varies from lender to lender.

Some evaluate affordability based on your regular salary, while others consider only a portion or none of your maternity income, assuming your employment has ended. 

The initial step involves identifying lenders that assess your regular salary rather than your reduced maternity pay. 

Therefore, you must check the lender’s criteria – some may offer loans up to five times your income, while others limit it to three times but this will depend on a few factors so only use this as a rule of thumb.

How To Find Suitable Lenders for Mortgage On Maternity Leave?

Predicting how a lender determines your mortgage eligibility is difficult. Mortgage advisors, however, streamline this process as they work with lenders regularly. Their experience allows them to grasp the specific criteria of individual lenders and guide you accordingly.

Notably, lenders differ in their offerings, and various circumstances affect mortgage applications, such as having a bad credit record or being without a job. 

But with such a vast amount of lenders, all with different criteria to meet, mortgage advisors can pinpoint lenders more likely to approve your application based on your unique situation.

How Much Deposit Do You Need?

The required deposit varies based on your circumstances, but a minimum of 10% of the property’s value is common. 

Factors beyond maternity may affect the risk the lender undertakes. For instance, in cases of bad credit, a higher deposit may be needed to mitigate the risk to them.

Is It Necessary To Tell Your Lender About Your Maternity Leave?

It is always advisable to maintain transparency with your lenders to avoid complications.

Disclosing you are on maternity leave will not harm your chances of getting a mortgage as much as providing false information could. 

Applying for a mortgage when you are on maternity requires you to submit your pay slips, which are likely to mention your maternity pay. 

Mortgage applications must be accompanied by documents proving your repayment capability. As a result, your maternity leave will also have to be disclosed. 

Remortgaging On Maternity Leave

Remortgaging is similar to applying for a new mortgage when on maternity leave. Again, the key is to find a mortgage lender willing to accommodate your full-time income without conditions. 

Many lenders will require proof of your return to work on unchanged terms to consider your ‘back-to-work’ income towards affordability. This can be a letter from yourself confirming your return date for some lenders or a letter from your employer for others. 

How To Repay Mortgage On Maternity Leave

1. Assess Your Finances

Early planning is essential to be able to afford repayments. So, analyse your income and expenses to determine whether your mortgage remains affordable amidst the changes.

2. Cut Unnecessary Costs

With a potentially reduced maternity income, you must differentiate between essential and nonessential expenditures. Avoiding the latter frees up funds for crucial payments like your mortgage, bills, and groceries.

3. Debt Reduction

Reducing your existing debts can lighten your monthly financial burden, making mortgage payments more manageable. As such, consider repaying your debts on time and explore opportunities for consolidating or refinancing high-interest debts to save money.

4. Start A Savings Account

Try saving regularly before your maternity leave begins. These savings can act as a safety net for unexpected expenses.

5. Stay On Track

Maintain a calendar of important payment dates, as maternity preparations are already demanding. Organising your financial commitments will make it easier to manage your budget effectively.

Conclusion

Although securing a mortgage on maternity leave comes with a few challenges, it is a very common situation for prospective home buyers and home owners to be in. Lenders are able to consider mortgages in this situation as long as you meet certain criteria. 

With careful planning, sound budgeting, and expert guidance, you can find the right lender to help you sail through this crucial phase in life.

And before you know it – you’ll be a proud homeowner while embracing the joys of motherhood!

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.