Some lenders will lend to a person on maternity leave but it’s important to be clear about your income and future plans.
You may think that getting a mortgage could be impossible if you’re currently on maternity leave. Fortunately, this is not the case. While there are some lenders who may be reluctant to lend in this situation, there are plenty who will.
So, what will a lender need to know about your current and future situation before they can consider your mortgage application?
If you plan to go back to work, prospective lenders will want to know when. If you are not going back to work, they will base the mortgage offer on the salary of your partner only, or if you are going back to work part-time, their offer will be based on your part-time income.
Lending policy during pregnancy
But what will they base their mortgage offer on while you are on maternity leave? Researchers from the website Which? spoke to a number of lenders in February 2019, asking what their lending policy would be for pregnant applicants. All of the lenders reportedly said they would calculate repayments based on the salary when a person returns to work.
However, some said they would need proof of how payments would be covered while on maternity leave when income will be lower.
Naturally, a lender will want to be sure you can afford your mortgage while on maternity leave. They will look at your income and will also need to know about your outgoings, including any childcare costs you’re likely to incur if you go back to work.
Returning to work
In terms of what proof is required that you’re going back to work, some lenders will want to see an employer’s letter verifying your return-to-work income, the date of return and your working hours.
One of our clients, Jane Andrews, didn’t think she would get a mortgage while on maternity leave but was pleasantly surprised to find that we could help her.
‘Our lender did ask for clarity on my return-to-work plans, and it was a huge relief to have our mortgage approved,’ she says.
Other lenders may ask for your most recent payslip if you are returning to work on the same income.
If you are returning to work on a reduced income, they may ask for written confirmation from your employer confirming the lower figure. Finally, some lenders may ask for a return-to-work confirmation letter from your employer and pre-leave income details.
Contingency plan
It’s sensible for you and your partner to have a contingency plan while you are off work. Some lenders may ask you how you’ll afford payments if there is a significant reduction in your income.
For your own peace of mind, you’ll certainly need to know how you will cope financially while you are on maternity leave. Do you plan to use some of your savings, are parents or relatives helping out or have you prepared a budget you can realistically stick to?
If you are self-employed, your lender will want to see that the business can run smoothly while you are on leave. If your income isn’t likely to change while you are on maternity leave, it may not be a problem. If your income will be reduced, it could affect your application.
Seek expert advice
It’s important to seek advice from an experienced mortgage broker who has dealt with maternity leave applications before. It’s also crucial for you and your partner to have a post-pregnancy plan. Be clear about when you intend to return to work, if at all, and make a firm decision on it before you apply for a mortgage.
Jane Andrews adds: ‘Using an experienced adviser made the process of selling our current property and buying a new one relatively smooth and stress-free which we very much appreciated while caring for a newborn baby! Our mortgage only took a week to get approved.’
The more information you can give to your mortgage broker not just about your income but your future intentions, the easier it will be for them to shop around on your behalf.