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Learning that you have a new baby on the way can be life changing – in more ways than one! Not only are you about to become a parent, but you may also be considering moving house too. Whether you’re looking for somewhere bigger, finding a home closer to family, or want to be within a good school catchment area, there are lots of reasons people choose to house hunt when they’re expecting.
How difficult it is to get a mortgage on maternity leave?
If this sounds like you, you might be wondering how difficult it is to get a mortgage on maternity leave, or whether you’ll be able to access the same rates as other people. The good news is that it’s certainly possible to get a mortgage when you’re on, or planning to go on maternity leave, as long as you can demonstrate that you can afford it.
What will my lender ask me?
The overarching question you can expect to hear from potential lenders is ‘will your circumstances be changing in any material way that might impact your ability to pay your mortgage now or in the future?’ This will be the case whether you are submitting an application on a new home or remortgaging your existing home to another lender.
Be prepared to answer questions about how long you intend to spend on maternity leave and what your terms of leave are, including how much you’re being paid and for how long. Your lender may even write to your employer to confirm this, so it’s important to be honest. They will also want to know whether you plan to return to work and on what terms.
If your earnings are going to be reduced during your maternity leave, the lender may need to see evidence that you have savings to help you cover this shortfall in the short term. These must be easily accessible, for example not tied up in another property or a notice savings account.
Is there anything else which might affect how much I can borrow?
Child Benefit payments can usually be taken into consideration when it comes to mortgage affordability calculations, especially for babies and younger children.
Similarly, maintenance payments can also sometimes be taken into account as long as they are formal agreements backed by a Court Order or Child Maintenance Services.
If you intend to return to work, it’s worth thinking about future childcare costs in advance. Lenders will need to ask about this as it affects your overall household expenditure, so make sure you’ve worked out anticipated costs and how you plan to afford them, as you may return on reduced hours initially.
Fostering and adopting
If you’re planning to foster or adopt, you may be wondering how this impacts your ability to get a mortgage, or the process you take to obtain one. Thankfully adoption leave was broadly brought into line with maternity and paternity leave in the UK in 2003, so you should be treated in the same way as anybody else and subject to standard affordability rules.
For those fostering, the income you receive for doing so may be considered by some providers, but this will vary between lenders, and will often depend upon other factors too, such as any additional sources of income.
What if I’m self-employed?
Naturally, some of the points we’ve covered so far will be a bit different for anyone who’s self-employed. You may well have a shorter or slightly less defined maternity leave period, or you might work ad-hoc hours.
It’s still possible to get a mortgage if you’re on maternity leave, but a mortgage broker will be able to help point you towards lenders more likely to accept your case, such as those that operate manual underwriting, meaning applications are reviewed on a case-by-case basis rather than being subject to a computer algorithm process.
In fact, working with a broker could be beneficial for many people on maternity or paternity leave searching for a mortgage, helping you to prepare for your application, and seeking out the right lenders for your circumstances.
Preparation is key
Whilst you should never be turned down for a mortgage purely on the basis of being on maternity leave, you may have to jump through a few extra hoops in order to show that you can afford it, both now and in the future. It’s often just a case of being a little more organised, documenting your expected costs and how you plan to cover them.
And remember it’s important to be honest to ensure you don’t find yourself unable to keep up with repayments in the future.
Charlotte Grimshaw is Head of Mortgages at Suffolk Building Society, a national mortgage lender operating a manual underwriting system.