Securing a Mortgage During Parental or Maternity Leave: A Guide

People on maternity or parental leave often wonder whether it’s possible to apply for a home loan during this time. After all, life doesn’t stop just because a new baby has come along!

New babies require extra space, while for some, having one may provide the motivation necessary to finally purchase property.

Banks and other lenders do take parental or maternity leave into consideration when considering your loan application; however, that doesn’t necessarily make getting one impossible.

Here, we explain how you can apply for a home loan when on maternity or parental leave.

Are home loans still available while on maternity or parental leave?
Absolutely – however the process may become slightly more challenging as lenders often require you to meet additional criteria before receiving approval for their loan product.

Lenders usually want to know whether your leave is paid or unpaid; otherwise they may treat you as unemployed even though you do have employment to return to. Otherwise, they may require proof that there are sufficient savings available in your account to cover mortgage repayments until your return to work.

A lender will want to know the details of your maternity or parental leave and when exactly it ends. They may request written confirmation from your employer in this regard.

Banks typically become less likely to approve your home loan application the longer you remain on maternity leave or parental leave as they assume you won’t return to the same position when returning from leave. So for instance, if you’ve been out more than 12 months with no return date set yet but intending to return within six months they are less likely to give approval than if you took three months off work before returning at six months’ time.

Can I Refinance my Home While on Maternity Leave or Parental Leave?
While you may still be able to refinance your loan while out on leave, expect more hoops to jump through than if you weren’t on leave.

If you’re on unpaid leave or not receiving your full salary, lenders may take this into account and reduce your borrowing capacity accordingly. As they see you as more of a risk than normal, they may ask you to take out loans with higher interest rates that could undermine the purpose of refinancing altogether.

Will pregnancy affect my mortgage application?
Unfortunately, pregnancy and planned maternity leave will likely make you appear as an increased risk, which could impact how much lenders allow you to borrow as well as the terms under which they lend it – this means reduced borrowing capacity or an increase in interest rate could occur – meaning reduced borrowing capacity as well as potentially higher rates.

Of course, when borrowing jointly with someone, the lender will still take their earning capacity into account unless they are taking unpaid parental leave.

Do I Need to Tell Lenders That I am Pregnant?
Lenders cannot legally ask whether you are pregnant and are not under any obligation to disclose that fact to them; however, they may ask about any factors which might compromise your finances or ability to repay a home loan in case any adverse impacts arise.

If you know you are pregnant and will need time off of work, this could have serious ramifications on your finances and should be disclosed to creditors. Overspending could put immense financial stress and damage your credit rating; to be safe, always borrow within your means as much as possible to ensure no extra loans or advances need be taken out to meet payments.

Does having children affect how much I can borrow?
Yes, when applying for a home loan, lenders will always ask how many dependents you have, since taking care of dependent children costs money; lenders thus take into account that less will remain for their loan payments.

Though it might be tempting, it’s always better to be upfront and let your bank know about any dependents, including children. By failing to disclose this information, or lying about not having them, it could lead to serious financial and legal repercussions for both yourself and them.