Going on maternity leave is an exciting time for expectant parents; you’re getting closer to finally holding your newborn and will likely be purchasing some last-minute baby items in preparation for their arrival. On top of this, some couples may decide to move house in this period, but how easy is it to obtain a mortgage whilst on maternity leave?
The good news is that securing a mortgage whilst on maternity, paternity or adoption leave is feasible. The affordability process may look slightly different to the ‘usual’, so it makes sense to go into your application prepared for everything the lender may wish to know.
Proving your affordability
A lender’s primary concern for anybody applying for a mortgage is whether they can afford to repay it, and with a newborn on the horizon, it’s understandable that lenders will need to ask relevant questions to determine your long-term affordability.
First off, they will need to understand whether your circumstances will be changing in any material way that might impact your ability to pay your mortgage. The lender will then need further information, such as how long you plan to spend on maternity leave, including whether you are planning to return to work at all. The lender will need to know the terms of your leave: how much you are being paid and how long for, and they may wish to contact your employer in order to confirm these terms.
If both parents plan to return to work after the leave period, the lender will ask you what your plans are for future childcare arrangements. The cost of childcare can have an impact on the household’s expenditure, so it’s important that you can prove you have a plan in place in order to afford any necessary childcare.
Other relevant finances
The lender may want to see evidence of savings if your earnings will be reduced whilst on leave. It’s important to note that these savings must be easily accessible, not tied up in a notice savings account or property, and they will only be considered for the period before you return to normal working patterns. If either applicant plans to reduce their working hours for the long term, this revised income will be used to assess affordability.
Certain regular payments can be taken into account for mortgage affordability purposes, as long as they have a significant period left to run. These can include Child Benefit, as well as maintenance payments (so long as the latter is backed by either a Court Order or Child Maintenance Services). For households that receive foster income, some lenders will accept these payments towards your affordability, however, often only if the household has other sources of income.
Finding the right lender for you
No one should be penalised for being on leave, so most lenders should be willing to consider your mortgage application, however they will need to look at your application in more detail to make sure the mortgage is affordable. It can be beneficial however to steer towards a lender that undertakes manual underwriting as they look at each case on an individual basis rather than relying on a computer-based response – this means a tailored approach can be taken for more complex circumstances (such as maternity leave) and allows an underwriter to look at the case holistically, taking into account your individual circumstances
Many applicants looking to secure a mortgage whilst on leave choose to enlist the assistance of a mortgage broker, as they can help alleviate some stress, finding a mortgage deal that is best suited to your circumstances.
If you’re looking to obtain a mortgage whilst on leave, be prepared to prove your affordability both now and in the future. Whether you need an extra bedroom for the baby, a garden for them to play in, or perhaps simply want to relocate closer to family or to a preferred school, there are a wealth of lenders out there that are ready to support you and your family in securing your new home.
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Charlotte Grimshaw is Head of Mortgages at Suffolk Building Society.
