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Maternity leave is an exciting time for any new mum. But it also comes with a few worries. One of which is wondering how this will affect your mortgage chances. Mortgage lenders can have varying criteria when it comes to considering income from maternity leave for mortgage applications.
This guide explains all you need to know about the implications maternity leave has on your mortgage options. Get in touch with our specialist mortgage brokers today.
Getting a mortgage on maternity leave
Being on maternity leave can result in a lower income, which can make it more challenging to apply for a mortgage. Lenders typically consider your income and employment stability when assessing your mortgage application.
If you are not receiving your regular income during your maternity leave, your lender may view your application as a higher risk. Some lenders will base your income solely on your Statutory Maternity Pay (SMP), and you may run into problems when trying to get a mortgage.
Is it possible to get mortgage approval when on maternity leave?
Yes, it certainly is possible to get a mortgage approved while on maternity leave, although it may require some additional effort and planning. Lenders will consider several factors when assessing a mortgage application, including income, employment stability, credit score, and debt-to-income ratio.
To increase your chances of being approved for a mortgage while on maternity leave, you may need to provide additional documentation to support your application. This could include a letter from your employer confirming your expected return date and income, as well as proof of any government benefits you are receiving.
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How does maternity leave affect my chances of getting a mortgage?
If you are planning to return to work on the same or higher pay after maternity leave, it may be easier to get a mortgage approved since your future income will be more predictable and stable.
However, if you are returning to work on lower hours or pay, this may impact your mortgage application as the lender will use the lower return to work income to calculate your affordability.
Some lenders may not take into account overtime, commission, or bonuses earned during maternity leave when assessing your mortgage application. However, some lenders may be more flexible and may consider.
How does paternity leave affect my chances of getting a mortgage?
Paternity leave may result in a reduction in income for a shorter period of time than maternity leave.
Typically, paternity leave is shorter and may be paid at a similar rate to your regular income, meaning that your income reduction may not be as significant as during maternity leave. As a result, most lenders may not take a reduction in income during paternity leave into consideration when assessing your mortgage application.
However, it’s still important to be transparent about your current income and any upcoming changes to your income, including your plans for paternity leave.
How can I improve my chances of getting a mortgage while on maternity leave?
Find a suited mortgage lender
One way to find lenders that are more likely to approve your mortgage application is to work with a mortgage broker who specialises in helping individuals on maternity leave obtain a mortgage.
Mortgage brokers can provide valuable guidance on the criteria and policies of different lenders, and help you navigate the application process.
Gather proof of income
Providing additional documentation to support your mortgage application can help improve your chances of approval, particularly if you are returning to work on a lower income than your usual full-time salary.
Providing a letter from your employer confirming the date you will return to full-time employment, your hourly rate of pay, and contracted hours can help demonstrate your future income and stability.
You may also want to provide payslips or bank statements to show your current income and expenses while on maternity leave.
Additionally, it may be helpful to provide a detailed budget outlining your current and future expenses, including any childcare costs, to show that you can afford your mortgage payments while on maternity leave and after returning to work.
This can help reassure the lender that you have a solid financial plan in place and are capable of meeting your mortgage obligations.
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Returning from maternity leave in less hours or money
Your contract may change when you return to work, for example, you may need to work part-time hours instead of full-time to balance the needs of your child.
This change in your income may affect the amount you can borrow, as the lender will typically consider your current and future income when assessing your mortgage application.
However, this does not necessarily mean that your chances of obtaining a mortgage will be reduced.
How much can I borrow when getting a mortgage on maternity leave?
Full-time or part-time
If you plan to go back to work part-time instead of full-time, it’s important to be aware that your borrowing potential may be reduced due to your decreased income.
Lenders typically consider your income as a key factor when determining your borrowing capacity, so a lower income may mean that you are eligible for a smaller loan or mortgage.
Joint mortgage
Getting a joint mortgage can certainly help your chances of getting approved for a mortgage if one of you is on maternity leave.
When you apply for a joint mortgage, the lender will consider the income and financial situation of both applicants. This means that even if one of you is on maternity leave and not earning as much income as usual, the other applicant’s income can still be taken into account.
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Borrowing amount summary
Mortgage lenders typically lend between 4-5 times your income, although this can vary depending on the lender’s criteria and your individual circumstances.
When you apply for a mortgage, the lender will typically use your income and expenses to calculate your debt-to-income ratio (DTI), which is the percentage of your monthly income that goes towards debt payments, including your mortgage.
Lenders generally prefer borrowers with a lower DTI, as this indicates that you have more disposable income available to make your mortgage payments.
How can Strive Mortgages help?
We have experience with maternity leave mortgages. Mortgage providers have different criteria for what they require, and we’re here to match your profession and circumstances with the lender that will accept your mortgage application. Get in touch with us today!
For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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