Last reviewed on 1st September 2023 by Martin Alexander (Mortgage Advisor)
Getting a mortgage on maternity leave can be difficult but it is possible. Some mortgage lenders view applicants on maternity leave as high-risk as you may be on a lower wage, but you certainly shouldn’t let this stop you from exploring your options.
Trying to find a mortgage while taking care of your newborn may seem like a lot to take on, but we’re here to help. Mortgages on maternity leave are possible, but your application must be well-prepared and placed with a suitable lender.
- Can I get a mortgage on maternity leave?
- How to get a mortgage on maternity leave
- Should I tell my lender that I’m on maternity leave?
- What amount can I borrow?
- Which lenders are suitable for maternity leave?
- Can I remortgage on maternity leave?
- What if I’m self-employed?
- Will credit issues affect my application?
- Speak to a specialist mortgage advisor
Can I get a mortgage on maternity leave?
Getting a mortgage is possible, although being on maternity leave can affect your chances of being approved. This is because lenders carry out affordability assessments mainly based on income. Maternity leave typically entails a lower salary and can therefore cause problems with your mortgage application.
It’s crucial to find a lender that understands you’re on maternity pay only for a short while and you’ll soon return to your normal salary. There are other lenders that won’t take your usual salary into consideration and should be avoided as a result. The easiest way to find a suitable lender is by speaking to an advisor who has experience with applicants on maternity leave.
How will maternity leave affect my application?
Maternity leave can affect mortgage applications because of a lower income than usual. Let’s say for example your income is £40,000 a year, but on maternity leave your salary will be significantly lower. As your income may decrease because of maternity leave, lenders will make assessments of your reduced income figure. This can cause issues with the amount you’re able to borrow.
Lower income can make mortgage approval difficult with many lenders, simply because of affordability. Lenders need to see that there’s enough income to repay a mortgage and that’s why maternity leave can pose problems. Nonetheless, there are ways to demonstrate that you can afford to repay a mortgage. Furthermore, there are better-suited lenders to approach in these circumstances.
How to get a mortgage on maternity leave
Not every lender will approve mortgages when on maternity leave, but there are lenders that will. It’s important to show lenders that although there’s a reduction in your salary, it’s just for a short period of time. Furthermore, you’ll soon be earning your usual amount of income. Doing this gives lenders confidence when assessing your affordability.
We’ve outlined a few ways to reassure lenders to assess your usual income and not your income while 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 you’ll 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 this information, then you could struggle with getting a mortgage. If your employer can provide this information but confirms that you’ll be on reduced hours, it will have a negative impact on your mortgage chances.
Should I tell my lender that I’m on maternity leave?
Always be honest with your mortgage 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. Most lenders also ask for evidence of payslips, which may show maternity pay as an income.
On mortgage applications, you’ll be asked if there are any circumstances that may affect your ability to repay a mortgage. Maternity leave is considered 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.
What amount can I borrow?
The amount you can borrow while you’re on maternity leave will vary with each lender. For instance, 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 check your lender’s criteria. For instance, some lenders will lend up to five times your income, with other lenders only lending up to three times.
Finding a lender that will assess your normal salary along with lending up to five times 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 your deposit amount.
Will a joint mortgage help if one applicant is on maternity leave?
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. That being said, it is rare as the time frame for paternity leave is usually a lot less.
Read more: How to apply for a joint mortgage.
Which lenders are suitable for 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 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 circumstances, an advisor can locate certain lenders that you’re likely to qualify with.
Advisors would also avoid lenders that are likely to decline you based on the information provided. Remember, affordability is only one part of your entire application. There are a number of other factors lenders will assess.
Can I remortgage on maternity leave?
Yes, while it’s possible to remortgage on maternity leave, you may run into affordability issues. If you’re switching lenders, your new lender will need to see evidence that your reduced income will return to normal and will be enough to repay the mortgage.
If you want to remortgage to a new rate with your existing lender, they too may ask for evidence of your income, although it isn’t as likely. This is especially true if you’ve always paid your mortgage on time and had no issues with arrears or late payments. On the other hand, if you’ve had previous issues with repayments, your lender may be more strict in assessing your remortgage application.
It’s important to remember that a remortgage may increase your monthly repayments. Check you’re able to repay the mortgage on your new deal before making any commitments.
What if I’m self-employed?
If you’re self-employed, getting a mortgage is possible for applicants on maternity leave. Lenders will need to understand how maternity leave will affect your business and base their affordability assessments on income via your accounts. This is typically in the form of an SA302.
As accounts are usually filed for previous tax years, lenders probably won’t be aware that you’ll be going on maternity leave, but be sure to declare this.
Lenders can assess how maternity leave may impact your business. You might have employees and therefore going on maternity leave will have little or no impact. If you’re a sole trader, then maternity leave may 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. Each lender is different, so it does depend on the lender in question and your financial circumstances.
Will credit issues affect my application?
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 adverse credit applicants 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.
If you have bad credit and are on maternity leave, the 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 need a mortgage on maternity leave, you can make an enquiry and a specialist will contact you. Avoid trying to apply with multiple lenders as you risk being declined which can affect your credit score.
Mortgages always vary, so without understanding your circumstances, it’s difficult to know what the best route to a mortgage would be. Speak to an advisor to help you get started.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.