Don’t worry… You’re not alone!
Starting a family and purchasing a home should be two of the most significant life-changing moments you will experience in your lifetime – especially if both are happening at the same time.
As much as you want to celebrate these huge milestones, you can’t help but think “Does having a baby affect my mortgage?” or “Will my loan be approved even if I’m on parental leave?”
What makes lending different and sometimes difficult for expecting or soon-to-be parents is that from the lenders’ perspective, borrowers on parental leave can sometimes be considered “high risk”, since they will be receiving minimal to no income at all for a certain period of time.
Some lenders also think there is a chance these borrowers may leave their employment for good, making lenders hesitant to lend them funds to finance their homes.
Lenders can use your return to work income, even if currently on or expecting to be on, parental leave (with reduced or no pay), towards calculating your maximum borrowing capacity.
This is beneficial in terms of allowing you to buy a property for the amount you require/could afford while working, instead of using the lower to no income you receive during parental leave.
However, not all lenders take this approach, and the lenders who do will have certain criteria you need to fulfill to qualify.
Lenders who have a “return to work” policy will only use your return to work income from your employer to calculate how much you can borrow, not any government parental leave payments (as these are temporary in nature).
This means that any monetary support, allowances or bonuses from the government during your parental leave will not be considered under this policy.
Lenders will take these payments into consideration only when working out how you will make payments during parental leave, whilst not receiving income from your employer.
We have written a comprehensive guide specifically for expectant or soon to be parents which takes you through the journey of applying for a home loan while on parental leave.
The Parental Leave Home Loan Guide is available to download (here)