How to get a home loan while you’re on maternity leave
The joy of becoming pregnant is no reason to put the joy of buying a home on hold! There are, for example, actually maternity home loan options out there expressly designed for people in this position.
Here’s some tips for applying for a loan when pregnant - so you can expect a great offer when you’re expecting!
Can you actually get a mortgage while pregnant or on maternity leave?
Yes, it’s possible - albeit, depending on your eligibility. Here are some essential details and things to remember:
- It’s going to be easier, if you’re pregnant, to apply for that home loan while you’re still working. Unfortunately, it is going to make things a little trickier if you’re on maternity leave.
- Special deals, packages and discounts are still available if you’re pregnant or on maternity leave.
- A maternity leave home loan lets you borrow up to 80% of a property price. (Can you please confirm the bit where it says “it can be as high as 90%? This seems contradictory.)
- In the case of unpaid maternity leave, you’ll need to have some money saved to be able to pay the repayments.
Lastly, we strongly advise two things:
- Have a clear financial plan in place to know how you’re going to manage maternity leave - and, of course, when the bub actually arrives.
- Apply for the home loan before your little bundle of joy arrives!
How do I find the best lenders offering Maternity Leave home loans?
The good news is that OzBroker works with several that do. We can help you work out the best one for your requirements.
Yes, there are limited options available. Lenders consider Maternity Leave home loans riskier - and many banks insist on basing an evaluation strictly on current income.
What you need to apply for a home loan on maternity leave:
- Proof of employment: salary slips, group certificate and PAYG summaries for the previous years.
- Statements demonstrating the state of your finances, including any loans and investments.
- Evidence of government benefits you are receiving, for example, Paid Parental Leave.
- An official letter produced by your employer which formally states you are on maternity leave! Be sure this document includes your return-to-work date and whether this will be in a full or part-time capacity.
What are the criteria used for approving a maternity leave home loan?
A lender will look to make sure you can meet the commitments of the leave period - with an emphasis on savings that might make up any shortfall.
They’ll also take into consideration:
- Your household equity.
- How well you’re staying up to date with your finances re: any current home loan repayments.
- Any Government entitlements you’re receiving.
- And this is key: the length of the maternity leave.
The maximum length of time considered by lenders is a year. If you’re only taking under about six months off work - you’ll be considered a much better bet.
Does it matter if you’re on Unpaid or Paid Maternity Leave?
As you can probably guess, it does: you’ll be judged more favourably by a lender if you’re getting an income - even if, as is typically the case, you’re getting half of what you usually earn.
Can you put a pause - or temporary - on current home loan payments?
You may have already had a home loan approved - but want to reduce the strain of making payments until you’re able to go back to work.
In this situation, your options include:
- If you have equity in your home or are ahead in your repayments - you can release equity to assist with repayments.
- Get a repayment holiday - effectively a reduction in mortgage repayments of up to 50% for up to 12 months. This could be a good option for you:
- If you can make the extra repayments when you get back to work to account for the reduction in payments when you were on leave.
- Are able to commit to a clearly set return-to-work date.
If you’re under financial stress while on parental leave, it might work for you - but note, unfortunately, you’re just delaying making payments. Your better bet might be getting the right maternity leave loan.
How do I work out the best mortgage while pregnant/on maternity leave?
As with all financial choices, a lot of the decision comes down to your personal circumstances. Please feel free to contact OzBroker for a consultation to determine the best option for your requirements.