Having a baby is a joyful experience, yet it is also likely to take a heavy toll on your energy levels.
When the extra demand that having a baby brings combines with the complexities of securing or refinancing a mortgage, your stress levels are likely to get amplified.
For this reason, it’s important to know a little bit about your financial options and how going on maternity could affect things.
The good news is, obtaining a mortgage during maternity leave is entirely possible; however, it may involve jumping one or two unexpected hurdles too.
In this article, we’ll outline what you need to know.
Does Maternity Leave Impact Your Mortgage Eligibility?
The answer is: this depends on your individual situation and your lender.
When calculating your mortgage affordability during maternity leave, the primary complication comes from lenders who use your temporary, reduced income to assess your borrowing capacity.
For example, if your standard annual salary of £40,000 is reduced to £25,000 during maternity leave, certain lenders will take the lower figure to gauge affordability, potentially restricting the properties you can consider financing.
However, other lenders are often happy to accept your pre-maternity salary for their affordability assessments.
Although they may require a letter from your employer confirming your post-maternity income and return-to-work date.
Finding a lender that’s accommodating to your situation before starting your maternity leave is advisable and something our qualified professionals can help you with.
Should You Disclose Pregnancy or Maternity Status to Your Lender?
Absolutely. Informing your lender about your pregnancy or maternity status is very important.
When applying for a mortgage, lenders will inquire about any anticipated “material changes” to your financial circumstances—essentially, anything that might prevent you from meeting your mortgage obligations in future.
Expecting a baby undoubtedly falls within this category and it’s essential that you answer this question honesty.
Even if your maternity leave hasn’t started yet and your payslips don’t reflect your upcoming salary reduction, telling your lender allows them to make informed decisions and prevents the risk of inadvertent mortgage fraud allegations.
Should the lender reconsider lending to you, finding out early empowers you to explore alternative mortgage options.
By providing your lender with accurate financial information, you allow them to tailor a solution aligned with your needs and ensure affordability post-baby arrival.
Steps to Navigating Your Mortgage Application During Maternity Leave
Here are three important steps we think could help you secure a mortgage while on maternity leave:
Talk to a Mortgage Broker
Enlisting the services of a mortgage broker, such as Your Mortgage People, streamlines the search for lenders who are accommodating to individuals on maternal leave, thereby sparing you the arduous task of sifting through any unsuitable options yourself.
In addition to this, going through a broker also minimises the risk of application rejection, safeguarding your credit rating.
Assess Your Budget
As you look for properties, consider how parenthood and maternity leave will impact your financial situation.
Evaluate whether you can sustain mortgage repayments, factoring in reduced income during maternity leave and the additional expense of feeding, clothing and supporting an additional person.
Lenders might request evidence of supplementary income sources, such as savings, partner’s earnings, or familial contributions, to ensure repayment feasibility.
Additionally, contemplate long-term financial obligations, including childcare expenses upon resuming work, as lenders scrutinise this aspect closely.
Obtain Employer Reference
Request an official letter from your employer validating key details relevant to your mortgage application, including your anticipated return-to-work date, working hours and salary.
Should you intend to resume work part-time, lenders will adjust borrowing limits accordingly based on the revised income.
Want to Talk it Through?
Hopefully, the above paragraphs have offered you a little insight into how being on maternity might affect you getting a mortgage.
If you want to understand the landscape in greater detail, speak to a qualified mortgage expert by calling us on: 01489 346624
We can help you understand your personal circumstances and suggest the best way to proceed with your application.
Alternatively, visit our contact form here.
