If you’re on maternity leave and need a mortgage, it certainly isn’t a straightforward task. As specialist mortgage advisors, we deal with enquiries that sometimes don’t fit the norm. If there’s a mortgage out there for you, we’ll find it and we’ll do our very best to make it happen. Maternity leave mortgages are possible, as long as your application is well-prepared and placed with a suitable lender.
- I need a mortgage, does maternity leave matter?
- Informing your lender that you’re on maternity leave
- How to get a mortgage on maternity leave
- How much can I borrow on maternity leave?
- Finding the right lender for a mortgage on maternity leave
- Self-employed mortgages on maternity leave
- Maternity leave mortgages with bad credit
- Speak to a specialist mortgage advisor
I need a mortgage, does maternity leave matter?
Maternity leave can affect your chances of being approved a mortgage. Lenders carry out affordability assessments based on income. Maternity leave usually entails a decrease in income and can therefore raise problems.
Let’s say for example your income is £40,000 a year, a lender would usually make income assessments based on that figure. As your income is due to decrease because of maternity leave, lenders will make assessments on your reduced income figure. Lower income can make mortgage approval difficult with many lenders, simply because of affordability.
Lenders like to see that there’s enough income to cover a mortgage and that’s why maternity leave can pose problems. Nonetheless, there are ways to demonstrate to lenders that you can afford to repay a mortgage.
Informing your lender that you’re on maternity leave
Always be honest with your advisor and your lender. Being on maternity leave doesn’t mean you won’t get a mortgage, but providing false information will guarantee you to be declined. The majority of lenders also ask for evidence of payslips, which may show maternity pay as an income.
On mortgage applications, you’re usually asked if there are any circumstances that may affect your ability to repay a mortgage. Maternity leave is considered as a circumstance that can affect your ability to repay a mortgage. This doesn’t mean you’ll automatically be declined, as there are certain steps you can take to improve your application.
How to get a mortgage on maternity leave
Not every lender will approve mortgages when on maternity leave, but there are lenders that may consider approval. It’s vital to show lenders that although there’s a decrease in your salary, that the decrease is just for a short period of time and you’ll soon be earning your usual amount of income. By doing this, it gives lenders confidence when assessing your affordability. We’ve outlined a few ways to convince lenders to assess your usual income and not your income whilst on maternity leave.
Get evidence from your employer in the form of a letter or a reference outlining:
- You still have employment once your maternity leave ends
- The approximate dates when you return to full-time employment
- Any changes to your employment once you return
- Your hourly rate and contracted hours once you return
If your employer can’t provide the above information, then you could struggle with passing affordability assessments. Even if your employer can provide the above information, but confirms that you’ll be on reduced hours, then this will also have a negative impact on your affordability.
How much can I borrow on maternity leave?
The amount you can borrow will vary and depends on the lender. For example, some lenders will calculate affordability based on your normal salary. Other lenders may only consider part of your salary and in some cases, lenders won’t consider any income, as they may feel your employment has come to an end.
The first step is to locate lenders that will assess you on your normal salary and not your reduced maternity leave income. The next step is to find how lenders assess income. For example, some lenders will lend up to 5x your income, with other lenders only lending up to 3x. Finding a lender that will assess your normal salary along with lending up to 5x your income, can ensure you’ll get the maximum amount you can borrow if approved. This also depends on other factors such as your credit score and the amount of your deposit.
If there are two applicants applying for a property, then lenders will make assessments on both applicants. This is known as a joint mortgage. In some cases, one applicant may meet the affordability on their own. In cases such as these, maternity leave can become irrelevant. On the other hand, paternity leave may also impact a mortgage application, but it is rare as the time frame for paternity leave is usually a lot less.
Finding the right lender for a mortgage on maternity leave
Now you know what to look for in a lender, how can you find one? It’s very difficult trying to guess how lenders make assessments and how much they’ll lend. For a mortgage advisor, it’s quite a simple task. This is because mortgage advisors are placing mortgages with lenders on a daily basis. The experience of placing mortgages over a long period of time enables brokers to understand individual lender criteria.
Lenders vary and so do applications. You may be recently self-employed or you may have bad credit. Only a few lenders will entertain such applications. Depending on your individual circumstances, an advisor can locate certain lenders that you’re likely to qualify with. An advisor would also avoid lenders that are likely to decline you based on the information provided. Remember, affordability is one part of your entire application, there’s a number of other variables lenders will assess.
Self-employed mortgages on maternity leave
Self-employed mortgages are possible for applicants on maternity leave. Lenders will need to understand how maternity leave will affect your business. Lenders usually base their affordability assessments on income via your accounts. This is typically in the form of a SA302. As accounts are usually filed for previous tax years, lenders probably won’t be aware that you’ll be going on maternity leave, however as we said before, be sure to declare this.
Lenders can assess how maternity leave may impact your business. You might have employees that run the business and therefore going on maternity leave will have little or no impact. If you’re very hands-on in your business, then maternity leave will have a significant impact on any income generated.
Advisors can demonstrate to underwriters that your business won’t be affected by maternity leave, if indeed that is the case. Every lender is different, so it does depend on the lender in question and your financial circumstances.
Maternity leave mortgages with bad credit
In all honesty, it can be difficult to secure a mortgage on maternity leave with bad credit. This is because the lenders that will consider your full salary figure as an income, don’t typically approve applications with bad credit. Nonetheless, a mortgage with bad credit is possible.
We’d highly advise you to speak to an advisor, as bad credit mortgages are assessed on a case by case basis. There are specialist lenders that can approve mortgages with severe adverse credit issues such as bankruptcy and IVAs. As you have bad credit and are on maternity leave, a possibility of getting a mortgage will improve if you have a deposit of at least 15-20%.
Speak to a specialist mortgage advisor
If you’re on maternity leave and would like a mortgage, you can make an enquiry and a specialist will contact you. Mortgage always vary, so without understanding your circumstances, it’s difficult to know what the best route to mortgage would be. Make an enquiry today and an advisor can help you get started.