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Your little bundle of joy is on its way, and you’re starting to realize you may need a bigger space to allow for the extras that come with it. But don’t panic – securing a mortgage on maternity leave, or just because you take leave, has become increasingly possible.
In the past, many lenders would have refused income from someone on or about to take maternity leave. This is generally on the grounds that she may decide not to return to work later on. Lenders will also consider the extra expense of having children when calculating affordability, such as childcare costs, which can affect the amount of borrowing available to you.
Despite this, times are changing in the property world, and discriminating rules such as these are being resolved. Many lenders will now treat you as if you’re still earning the income you had before going on maternity leave, or offer alternative solutions to fit your new situation.
Despite mainstream lenders still working to more stringent criteria, some have started to change and align more towards the case-by-case approach previously only found with private banks.
Mortgage rules may have got tougher in recent years, but lenders are currently offering some of their most competitive deals yet and loosening criteria in line with them. In some cases, a letter from your employer – confirming your return to work date and expected salary – is now enough, and lenders will then use the full return to work salary to calculate affordability.
Equally, if you can afford to use just one partner’s income, childcare costs will not be accounted for, and as long as your documents are up to date, you may even be considered simply on ‘temporary leave’. In this case, lenders will generally look at your 2-year employment history, which will be used to help qualify for the loan. If you’re going to return from maternity leave before the first mortgage payment, a lender will be likely to simply use your regular income.
If you wish to increase your borrowing to secure that bigger, dream house, you may struggle a little more, as lenders will be concerned whether you can afford the bigger mortgage with a drop in income. Yet there are still plenty of options available, such as spreading your repayments over a longer term to make it more affordable, so you can then reduce the term once you return to work. Alternatively, your existing lender may also view your change in circumstances with a kinder eye.
Essentially, if you’re looking for a mortgage on maternity leave, you will need to consider whether you can manage mortgage payments, be it on just your partner’s salary or with less of your own. You’ll also need to consider if that income meets the lender’s affordability requirements, and when your return from maternity leave will fall – if you return at all.
There are, of course, some exceptions to the rule, such as self-employed individuals or for companies that only provide a small portion of the usual salary for employees on temporary leave. Essentially, every lender will tend to deal with this slightly differently, so the best thing to do is to talk your situation through with a broker, who will help you make sense of the many options available to you, so you can find the very best solution.
Whether it’s starting a family in their new home, moving to allow for some extra room or remortgaging to ease the financial pressure off having a child, we’ve helped a huge number of clients in this situation.
If you would like to find out more, please do not hesitate to contact one of our expert brokers anytime, who will be happy to discuss this in more detail.