Mortgage on maternity leave
As we all know, parents take maternity leave when necessary, and as mortgage brokers, we often get asked, “can you apply for a mortgage on maternity leave?” It is possible to obtain a mortgage while on maternity leave; although many mortgage companies are wary of clients who are away from work for maternity reasons, there are still ways to get a mortgage.
This guide will explain all the implications of maternity leave for mortgage applications, outline the criteria for lending to new parents and tell you where to find the best advice.
Our FAQ section answers the most frequently asked questions about maternity leave mortgages.
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Is it possible to get a mortgage while on maternity leave?
It is possible with certain mortgage lenders but finding the right one who allows maternity leave income is essential. Some mortgage lenders won’t lend money to applicants on maternity leave, while others may require proof that you are returning to work with full-time earnings.
Finding a lender that understands the specific needs and won’t turn away customers on maternity leave is essential. A broker with mortgage advisors specialising in obtaining mortgages for pregnant borrowers is the best way to locate a mortgage on maternity leave.
What does maternity leave have to do with a mortgage application?
Mortgage applications are affected by maternity leave, as most lenders assume applicants will have a reduced income when they take maternity leave. If you are applying for a mortgage with a salary of £30,000 per year and a maternity leave, you will likely have a reduced income so some lenders may not base your affordability upon the full £30,000. Another mortgage lender will offer you a mortgage based on a smaller percentage.
However, some lenders will consider your entire salary even if you are on maternity leave at the time of mortgage application.
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How to get a mortgage for maternity leave
A letter from your employer or reference will be required to confirm that you are qualified for a mortgage with one of these flexible lenders.
- You’ll be returning to work.
- The date that you expect to return.
You may also need proof of your terms for returning to work with your lender if your hours and income are the same, for example. If they are not, what will your income be? Lenders won’t likely offer you more than the salary you can show you will earn when you return to work. Lenders may not lend you money if you can’t prove that you work full-time and your pay rate hasn’t changed.
Before you apply for a mortgage deal, you should speak with our mortgage brokers who specialise in customers on maternity leave. They will be able to introduce you to a lender that understands your circumstances and can offer you a great deal.
Constitute financial advice by clicking the link below to begin your journey of a mortgage on maternity leave.
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What if I go back to work part-time?
Most lenders won’t be able to offer you a mortgage if you have a part-time income. This would mean that you’d be considered part-time, but it doesn’t necessarily mean that you won’t be able to get a mortgage.
What is the maximum amount you can borrow on maternity leave?
Lenders will vary in their limits on how much you can borrow while on maternity leave. Some lenders will accept 50% of your income, while others will not. Some lenders will lend based on 100% of your regular salary.
If you are applying for a loan while on maternity leave, it is crucial to find the right lender. You should choose a lender that allows you to declare as much income as you want without restrictions. You’ll also want to locate the lender first, as too many requests in a short time can adversely impact your credit score.
Lenders will let you borrow up to 4.5 times your income. Others allow you to borrow as much as five times. A minority can borrow even more. However, other factors, such as bad credit or money saved, can affect your borrowing ability.
Joint mortgages for one applicant who is on maternity leave
If you are applying for a mortgage jointly and one of you is on maternity leave, some lenders will consider your income and lend between four to five times the combined income.
Example: If two named applicants earn £20,000 each and one is on maternity, lenders may consider your combined income to be £40,000. The lender will accept this evidence if you can prove that neither of them will be working – either on maternity or paternity leave. This scenario will allow you to borrow between £160,000-£200,000, depending on your circumstances.
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What amount of deposit are you able to put down?
Your overall financial situation will determine how much deposit you need to obtain a mortgage. Except if you apply through a scheme such as Help to Buy, the minimum deposit you will need is 10%.
The chances of getting a mortgage based on maternity income at the lowest rate possible are higher if the deposit is larger. Borrowing at 50% loan-to-value (LTV) will make you more persuasive than borrowing at 95% LTV.
Your maternity status will impact the amount of deposit you must pay. The risk the mortgage provider believes they are taking by lending on your home will determine how large a deposit you’ll be asked for. You might have to pay a higher deposit if you have poor credit.
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Remortgaging during maternity leave
Finding the right lender for you is critical; contact an expert mortgage broker to begin your journey. The broker could save you time, money and rejection. The lender must be willing to lend money based on your full-time wages without restrictions. Many lenders will require evidence that you are returning to work with the same employment terms and full-time hours. Some will be more strict than others.
It’s important to remember that a lender can remortgage your home based on your full-time income. A broker specialising in maternity leave customers is the best way to locate the right lender. You can be sure they will know the best mortgage providers for you in these situations.
What mortgage lenders will take my full salary?
Most UK mortgage lenders will consider mortgage applications based on your entire salary during maternity leave. Only a few lenders won’t consider your application, including Vida Mortgage Loans, Hodge, and Marsden Building Society.
Be aware that lenders may not be able to consider your request without a caveat.
Take, for example:
- Earl Shilton Building Society will offer you a mortgage based upon multiple your full-time earnings, but only your maternity income can be used to assess affordability
- Teachers Building Society decide whether to offer mortgages for maternity leave applicants based upon borrowers’ full-time salaries on a case-by-case basis
- Natwest will allow you to use your full-time income for affordability. However, it must verify that you plan to return to full-time work. It also reserves the right to ask for additional information if necessary.
- Post Office will ask you to confirm that you intend to return to full-time work. If you are going back part-time, it will only allow you to declare your lower income.
- Precise mortgages will not consider your full-time income if you have returned to work. It will request a letter from your employer to verify your hours and pay.
- Santander Want a mortgage that is affordable while on maternity leave? It will consider the cost of childcare when calculating this.
These are just a few caveats mortgage lenders have for maternity leave applicants. When searching for the right lender, all of these should be considered. This is why it is highly recommended to speak with a mortgage broker.
A broker specialising in maternity leave applicants can tell you which lenders are happy to provide mortgages based upon full-time salaries with minimum caveats. They have strong working relationships with mortgage providers and can negotiate the best deal for you.
Talk to an expert about mortgages and maternity leave
Finding the right lender to help you apply for a mortgage is crucial if you are on maternity or due to go on it. The wrong lender could result in a mortgage based on a small percentage of your full-time income or rejection. It is not a good idea to approach multiple lenders at once. Too many applications can cause credit problems.
Applying through the right broker is the best way to find your perfect lender. Our broker will consider your circumstances and match you with the right advisor and will help people obtain a mortgage for maternity leave every day.
FAQs
Do you need to tell your lender that you are on maternity leave?
Yes. There is a good chance that the lender will discover you are on maternity leave. The lender will ask you to produce recent payslips to prove your earnings. Evidence of your maternity leave may also be required.
The lender will ask you questions about any changes in your financial situation that might affect your ability to repay the mortgage. You are eligible if you have a lower income or take maternity leave.
Do you need to tell your mortgage lender that you are pregnant?
Yes. It’s best to inform the lender if you are pregnant and applying for a mortgage. Although they won’t directly ask you about your pregnancy, they will ask you to list any material changes that could impact the loan repayment.
You have not yet begun maternity leave, so it is technically unclear if expectant parents must legally disclose that they will be absent from work and eventually have a dependent. This can impact affordability.
Since the dependent is not yet present, lenders will differ in their opinions on whether it should be declared and at what point. Is it necessary to declare at conception? Week four, Week 12? At birth?
This will be discussed with the lender’s underwriters. It is essential to tell the lender everything you know about your pregnancy when applying for a mortgage.
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What is the difference between paternity and maternity leave?
It doesn’t matter to mortgage lenders. Most lenders who accept maternity leave will also accept paternity leave. The same rules apply to mortgage applications for paternity or maternity leave.
Is it possible to get a mortgage for maternity leave for a self-employed person?
This can be more complicated than you might think. The lender will ask you about the impact of your maternity leave on your business if you are looking for a self-employed mortgage. Most banks will lend based on your year-end account figures or your SA302s. This doesn’t reflect your future income.
You or your partner can declare that you are pregnant. This will impact your time to work on your business and your future income.
Your involvement in the business will determine how much impact this may have on your application. The effect on your income will be huge if the business cannot function without you. If you have employees who will take care of the business on your behalf, the impact on the business may be minimal.
The lending underwriters might agree that your income won’t be affected by your self-employed maternity leave. However, you will need to answer any additional questions the underwriter may have.
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What happens if my credit score is not good?
You may have a more challenging time getting a mortgage if you are going on maternity leave and have bad credit. Lenders that will accept your entire pre-maternity income are the ones that may not lend to people with bad credit.
Many lenders will accept adverse credit depending on your deposit amount and other factors. Some lenders will take cases as severe and as serious as a bankruptcy. Others may only require a 15% deposit, depending on the length of your bankruptcy.
These lenders won’t accept your entire income if you are on maternity leave. Approval will be granted on a case-by-case basis. Before applying for a loan, you should speak to a mortgage broker with knowledge of the market. This will ensure you have the best chance of finding the right lender in these situations.
So contact us now or begin your journey here: