Does being on maternity leave affect mortgage renewal?
Sometimes, everything happens at once. If you're in the process of buying a property or moving home, and you or a partner goes onto maternity leave, the change in income can throw a spanner in the works.
While some lenders will outright reject an application without a guarantee your income will revert to previous levels, some are far more flexible with lending to new parents.
Here, the Revolution Brokers team explains how mortgages on maternity leave work and all the factors to consider. For more help progressing your mortgage application or finding a home loan while on maternity leave, give us a call on 0330 304 3040, or drop an email to [email protected].
Will a Mortgage Lender Approve Me While on Maternity Leave?
We can't guarantee your bank will approve you, but finding a loan while on leave is undoubtedly possible. Some lenders reject any applications of this type, but others have several options geared towards new parents.
The key is to use a whole-of-market broker to assess your circumstances and find the right lender to apply to.
Many high street banks are cautious about lending in this scenario because they assume that your income will immediately decrease. However, it depends on whether you receive occupational maternity pay, statutory pay only, or a combination of the two.
Other lenders will include your regular salary in all of their calculations, assuming that you will return to work after your leave.
Lenders will usually ask for a letter from your employer, confirming that you are expected to return to work and when that is presumed to be.
They might also ask for evidence of your employment terms to see whether you will still be working the same hours and earning the same salary. If not, they'll want to know how your income will change to make an informed assessment about your future affordability.
What Happens If I Go On Maternity Leave Midway Through a Mortgage Application?
Mortgages and property chains can take a significant amount of time to arrange, so it's not unusual that you might end up going on maternity leave while you have a pending application or an existing agreement in principle.
If this happens, you must tell the lender of your change in circumstances.
Even if that means you need to find a new lender, lenders will likely review any ongoing agreement and identify from payslips that your income has changed - which could be disastrous if you have intentionally withheld information.
Can I Get a Mortgage During My Pregnancy?
There is absolutely no reason you can't get a mortgage during pregnancy, but again it's wise to tell the lender when they request information about material changes to your circumstances.
Although you may not yet be on maternity leave, you legally need to disclose anticipated changes.
Lenders all have different policies on what they will do about calculating your affordability while on maternity leave or if you will be going on leave soon.
- Some take 50% of your current income and base the application on that.
- Others will assume you will cease earning a salary at all.
- Still, others will calculate based on 100% of your typical wage.
Hence the importance of working with a broker who will advise which lenders have the most compatible policies that mean you will be able to secure the mortgage you need.
Can I Get a Joint Mortgage with My Partner Who is on Maternity Leave?
Yes, you can. Lenders tend to offer a maximum mortgage of around four to five times your annual income, combining both applicants’ earnings.
For example, if you both earn a £20,000 salary and one partner is on maternity leave, you’ll find that the right lender makes a significant difference to what you can borrow.
- Lender A will calculate the mortgage cap based on £40,000 joint income.
- Lender B might figure this based on £30,000 total earnings.
- Lender C may only offer a mortgage based on one salary of £20,000.
Given that they will also have different policies about the multiple of your annual earnings, you could be offered £160,000 by one bank, but £200,000 from another, so it pays to have a broker to help you work out which lender is your best option.
Do I Need a Bigger Deposit to Get a Maternity Leave Mortgage?
It really depends on the other circumstances but most applicants will need at least a 10% deposit, unless they are buying through Help to Buy or another support scheme.
The higher the deposit you can offer, the less risky the loan, and the better your chances of approval. You will also usually get better interest rates with a mortgage application at a lower Loan to Value ratio.
Can I Remortgage While on Maternity Leave?
This situation works pretty much the same as getting a new mortgage - and depends on the lender's policies and their attitude to lending on maternity leave.
Suppose they can see evidence that you intend to return to work on the same hours. In that case, niche lenders might be happy to assume your salary will remain as it is now and not put any restrictions on the remortgage value available.
Expert Advice with Mortgaging a Property on Maternity Leave
Given the enormous variances between how mortgage lenders in the UK treat maternity leave applicants, it is vital to seek professional advice. The last thing you need is more stress and to be rejected by multiple lenders simply because their policies don't meet your borrowing needs.
Give mortgage brokers a call on 0330 304 3040 or email the team at [email protected] for independent advice and support to ensure you get the mortgage you require.
FAQ's
How Do Maternity and Paternity Leave Impact My Mortgage Application?
Most lenders don't distinguish between the two - so the flexibility of their lending criteria will apply the same for either form of leave.
Can I Get a Self-Employed Mortgage on Maternity Leave?
Possibly, yes, but the process might be a little more complex. Usually, self-employed mortgages are calculated based on your average annual earnings, evidenced by tax returns or filed trading accounts.
If you are on maternity leave or will be soon, it's challenging to estimate your future annual income, but this will likely change. In that scenario, it depends on what sort of work you do, whether your business can run without you, and how stable your role is.
Are There Bad Credit Mortgages for Maternity Leave Applicants?
Being on maternity leave and having a bad credit history is a double whammy of risk factors that can make it very difficult to find competitive mortgage borrowing.
You can find specialist bad credit mortgages even in severe credit issues, with deposits starting from 15% and upwards.
It's unlikely you'll secure a bad credit mortgage on maternity leave. However, this is very much a bespoke area of lending. The best advice is to contact the Revolution team to get a better idea about your mortgage challenges so we can guide you through the options available.
