There are a variety of reasons you may choose to move house whilst pregnant or with a newborn – perhaps you’re planning to upsize with an extra bedroom for the newest addition, find somewhere with a garden, or maybe you just want to be closer to family members?
Whatever your reason for moving house, the overarching concern is often whether you can obtain a mortgage whilst on maternity or paternity leave.
The good news is that getting accepted for a mortgage whilst on leave is possible, so long as you can demonstrate that you can afford it.
It pays to be aware of what exactly lenders are looking for and the questions that they are likely to ask, so you can be prepared and have all the information you’ll need to hand.
When calculating your affordability, lenders do not simply determine whether you can afford the repayments at this moment in time, but instead look ahead to ensure that you can afford your monthly payments in the future too.
The main question that a lender must understand before progressing with a mortgage application is “will your circumstances be changing in any material way that might impact your ability to pay your mortgage now or in the future?”
To determine this, they may ask questions like:
● How long do you intend to spend on maternity/paternity leave?
● When do you intend to return to work?
● What are the terms of your leave? This includes how much you are being paid and how long for – the lender may write to your employer to confirm the terms of your leave.
If your earnings are reduced due to the terms of your leave, the lender may ask for proof of savings in order to calculate affordability.
These savings must be easily accessible, not tied up in property or a notice savings account.
If one or more of the applicants plans to reduce their working hours, resulting in decreased earnings, it is this revised income that will be used for the affordability checks.
This is because your current income is irrelevant to your long-term affordability with changes on the horizon.
If you plan to return to work once your leave is up, lenders may need to know what your future plans for childcare are.
Regular childcare can come at a significant cost with a large impact on the overall household expenditure, so lenders must consider if this will affect your ability to afford the mortgage in the future.
Considering additional income
If you are in receipt of Child Benefit, this income can be used for affordability checks.
It’s important to note that most lenders will only consider child benefit for younger children as the payments often cease at the age of 16.
Child maintenance payments may also be considered, but often only if this is a long-standing, regular payment or it is guaranteed through a formal agreement backed by a Court Order or Child Maintenance Services.
If you foster a child and receive foster income, this may be considered when assessing affordability.
It’s important to note that this is lender-specific and is likely to depend on whether your household has other income sources.
Adoption leave and mortgages
In 2003, adoption leave was brought broadly in line with maternity and paternity leave in the UK.
If you have adopted a child and are applying for a mortgage, you should be treated the same way and subject to the same affordability rules as those on maternity or paternity leave, so all of the above information should apply.
Working with a mortgage broker
The role of a mortgage broker is to take all of your circumstances and financial details into account in order to find a lender that can provide the mortgage deal that is most suitable.
For those looking to get a mortgage whilst on maternity or paternity leave, a mortgage broker may be the helping hand you need to find an appropriate lender who will consider your circumstances.
Consulting a mortgage broker is advised if you are self-employed, as your maternity/paternity leave may be slightly different to others for example, you may be returning to work much earlier, but with ad-hoc hours in order to minimise the disruption to your business.
In short, it is more complex if you’re self-employed, so a mortgage broker can help direct you towards lenders who are more likely to view your circumstances more favourably.
Look for manual underwriting
No lender should penalise applicants for being on maternity, paternity or adoption leave at the time of their application but may need to do extra due diligence to truly understand the applicant’s income and expenditure both now and in the future.
Many lenders across the country assess affordability through automated, computerised systems that do not take all of your personal circumstances into account.
By finding a lender undertaking manual underwriting, you can be confident that your application will be reviewed on its individual merit, rather than a computer-based response.
So, whilst a mortgage on leave is obtainable, you may need to look further than high street lenders.
Consult a broker if you need additional assistance in finding the best lender for you and be prepared to provide evidence that you can afford the mortgage repayments both now and in the future.
Charlotte Grimshaw is Head of Mortgages at Suffolk Building Society.
Luciana joined our team as a mum blogger in 2020. A dedicated mum to a lively daughter and a dog, Luna, Luciana brings authenticity and passion to every post. Her expertise in parenting and lifestyle topics offers practical, relatable advice for real-life situations.