Getting financial approval to buy a property can be complicated, as lenders want to ensure you can comfortably service the loan. Unfortunately, pregnancy, maternity leave and parental leave can impact those trying to purchase a home. If you’re house hunting and expecting (congratulations!), here are some key considerations when submitting your application.Â
Can I get a home loan while on maternity or parental leave?Â
There are plenty of reasons to purchase a home while on maternity leave, but one of the most common is more space when the baby arrives. While getting approved for a home loan while on maternity leave is possible, the process can be more difficult for expecting mothers than before they fell pregnant.ÂWill pregnancy affect my home loan application?
While pregnancy can affect your home loan application, it’s only one of the things lenders consider on their list of criteria. Here are some common questions women tend to ask when they’re expecting. Do I need to disclose if I’m pregnant? Legally, lenders aren’t allowed to ask if you’re pregnant, as it may be seen as discriminatory. And while it’s ok to be discreet, it can come back to haunt you if you’re not honest when asked whether you know of any upcoming changes that will impact your finances. Providing false or misleading information can also have significant consequences later on. Does having kids affect how much I can borrow? Yes. When you apply for loans, lenders always ask you how many dependents you have. Caring for children is a significant financial cost, so it’s essential to disclose this. Not doing so can cause considerable financial stress.  Can I refinance while pregnant? Like a regular loan, refinancing an existing loan while on maternity leave can mean a few extra hoops to jump through. If you’re already on maternity leave, your lender may reduce your borrowing capacity as you’re not receiving your full salary.ÂDo I need any additional documents?Â
If you’re pregnant or already on maternity leave and applying for a home loan, your lender may require some additional documents from you alongside the other recommended documents. These may include: Â- Payslips or other proof of income for the three months prior to taking maternity leave.
- A letter from your employer stating the details of your maternity leave including your salary, job position, length of service and intended return date.
- Your lender may also ask for proof of living expenses, including how much you spend on childcare and other similar costs of raising a child.
- You may also be asked for proof of any government parental leave (or similar) payments you receive.Â
What factors do lenders take into consideration?
When you apply for a home loan, lenders assess your application against a set of criteria. Lenders consider a few other factors for pregnant applicants or those already on maternity leave. These include (but are not limited to):Â- If you’re getting paid or unpaid maternity leave.
- If your spouse or partner is working and if their salary is enough to cover your mortgage repayments and living expenses.
- Your intended date of return to work and the terms established with your employer for your return.
- If you have enough savings to cover your mortgage repayments until you return to work.
- If you’re receiving government payments (and how much).
- If you’re refinancing, how much equity you have in your home.Â
- The size of your deposit and what the LVR ratio will be if you’re buying.Â
- How many dependents you have and the costs associated with raising them.
Loan features to consider
Depending on your lender, there are some additional loan features you can consider.ÂMortgage repayment holidays/freezeÂ
Some lenders offer Mortgage repayment holidays or freezes in certain circumstances. These are limited periods (generally up to 12 months) when you don’t have to meet your regular repayment amount. In some instances, you may not be required to pay anything.Parental leave mortgage repayments
Similarly, some home loans and lenders may consider reducing mortgage repayments by up to 50 per cent for as much as 12 months. In these circumstances, it’s common that you’ll need to have had the home loan for at least 12 months.Interest only repayments
Lastly, some lenders may let you switch to interest-only repayments while you’re on maternity or parental leave. Interest-only repayments allow you to pay only the interest calculated on your loan and none of the loan capital or the amount you’ve borrowed.ÂBoosting your chances of being approved while on maternity leave
If you’re newly pregnant or about to head on maternity leave and are in the market for a property, there are some things you can do to boost your chances of approval in the eyes of a lender. These include:Â- Applying for your loan when you’re already on paid parental leave, as lenders often look more favourably on those getting paid. Â
- Set a return-to-work date with your employer and the terms on which you will return. Lenders like to see a written timeframe and conditions for your return.Â
- Boost your savings as much as possible before going on maternity leave. By having a solid savings base, you’ll present as a more favourable applicant as you’ll be more likely to cover your mortgage repayments until you go back to work.Â
- If you can, borrow with someone else (like a spouse or partner) who is still working. Their income may boost your borrowing capacity.Â
- As with any mortgage application, don’t try to borrow more than you can afford. Keep your mortgage repayments manageable and LVR as low as possible. Â
- Lastly, chat with an Inovayt mortgage broker who can guide you through the process and advise on a strategy that best suits your financial situation.Â
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