Can I get a mortgage on Maternity / Parental Leave?
You may think that getting a mortgage could be difficult if you’re about to start, or are currently on maternity or shared parental leave. Fortunately, this is usually not the case. In this article we refer to ‘Maternity Leave’ but the same treatment would be true of shared parental leave, in most circumstances.
Mortgage lenders are under an obligation to ensure your mortgage is affordable, so they will need to know your current and future situation before they can consider your application. They will need to understand if and when will you be returning to work. This is crucial when looking at affordability which determines how much you can borrow.
If you don’t have plans to return to work, affordability will need to based on your partners income only. If you do plan to return to work, the income you’ll be going back to will be needed as part of the mortgage application process.
Lenders have differing requirements
Each lender will assess your current circumstances in different ways but they will all be likely to assume that if you are on Maternity Leave or about to start it, your income will be less. However, lenders do recognise that the maternity leave is only going to last for a short period of time.
Lenders can look at your pre-maternity income and use this for affordability. So, if you’re going to go back to work on the same terms and the same hours as you did prior to starting maternity, then a lender may simply ask for your latest payslip before you went on maternity leave to clarify the income that you will be returning to, they will also need to establish your return-to-work date.
Sometimes a lender may ask for you to write a letter to state that you’re going back on the same hours as before, or they might actually write to your employer to get a reference to confirm that the discussions have been had and that the employer is expecting you back on the same terms that you previously left.
Do you plan to work fewer hours after maternity leave?
You might plan to go back to work on reduced or part time hours. In this instance lenders will take the salary you will be on once you return to work. A letter from your employer could be needed to confirm this.
Lenders will need to factor in any ‘future’ costs that having a child will incur. For example, if you have stated that you will be returning to work, you will need to demonstrate that you have considered and thought about childcare. If there will be childcare costs in the future the monthly cost of this will need to be factored into affordability, just like other regular committed expenditure such as loans or credit cards.
If you don’t plan to have any childcare costs and relatives will be the carers while you work, this will need to be noted down as part of the application. This should mean no monthly committed expenditure is taken into account. Speaking with a whole of market mortgage broker is key to finding the right mortgage and getting the best advice.
Undray Griffith – 3rd February 2023