Can I get a mortgage on maternity leave?

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Can I get a Mortgage on Maternity Leave?

Brian talks to us about mortgages when on maternity leave.

Can someone get a mortgage if they are on maternity leave?

It’s nice to be the bearer of good news for a change on mortgages! Yes, the short answer is that you can. Lenders are not allowed to discriminate against you if you are pregnant or on maternity leave.

How does someone apply for a mortgage when they are on maternity leave?

When you complete an application with a lender or go to a broker, they will be looking at your salary before you went on maternity leave and your plans when you return to work. 

Lenders will ask whether you plan to go back full-time or part-time. If you’re going back part-time – most lenders will base things on that when they’re looking at the affordability of the mortgage going forward. 

They’ll also try and get a feel for when you plan to return to work. Lenders have different criteria and policies around this. Let’s say you’re going back to work in nine months’ time. Some lenders would check if you have enough liquid resources – cash savings, help or whatever – to cover you until you return to work.

How does being on maternity leave affect someone when they’re applying for a mortgage?

You can apply when you are on maternity leave, or about to go on it, or when you’re coming off leave. Lenders take a sensible approach in underwriting the mortgage on the back of your plans. 

They will be looking at any childcare costs you will have when you return to work, or see if there is family assistance to help mitigate those costs. Lenders are worried about the affordability of the mortgage, so they want to understand your plans and income – including any additional income in terms of child benefit. 

So nothing precludes you from applying for a mortgage. There are just a few more hoops to jump through – but not too many.

What paperwork will I be asked to provide if they’re on maternity leave?

The key thing is the latest pay slip showing your earnings before you went on maternity leave. Some, but not all,  lenders want details of your savings to cover the period until you return to work. 

Lenders will also look at your income and expenditure once you return to work. Most will work from a letter from the applicant as to what their plans are, and the expected future  commitments and income. 

There’s a little bit of flexibility that comes into this,  but the key thing is that there are no standard requirements. It varies from lender to lender. Some are more maternity leave-friendly than others. Nationwide in particular are a very strong maternity leave lender.

Does a person have to disclose they are pregnant when applying for a mortgage? 

You have to complete a mortgage application that’s factually correct. But lenders don’t ask about pregnancy on an application form. They use a more general question along the lines of ‘do you anticipate any changes to your circumstances in the near future?’ If you’re pregnant, we would advise answering yes there.

But let’s face it, a lot of people don’t actually know that they’re pregnant for the first two or three months. Plus, not everything always works smoothly on these things, and you never know that it’s all going to go as you wish. 

But as soon as you’re aware that there’s that potential change in circumstances, it should be declared on an application. Different lenders will take more or less notice of that. It could be early days – you don’t know whether you’re having twins, triplets or quadruplets so it’s difficult for a lender to make a hard judgement. 

Having a broker on your side could help build the case and have a rational discussion with you. The best thing might be to talk to somebody who can hold your hand through the whole process. 

So while there is no question specifically on this, our view is that you should very much declare the potential change in circumstances.

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Can you pause mortgage payments on maternity leave?

You can’t just do it because you’d like to. You always need to talk to your lender and seek permission to do so. With some lenders, if you have regularly overpaid or made a lump sum payment to your mortgage before you go on maternity leave, you can use that overpayment reserve. 

You could either reduce or stop your mortgage payments for a period of time until the overpayments have been used up. But again you can’t just do it. You have to tell them what you’re looking to do and seek their permission. 

The worst thing you can do is just suspend the payments yourself because that’ll put you into arrears and you could default on the mortgage. That’s never a good idea at all. 

If you are genuinely struggling, there is the Mortgage Charter, which is designed to help clients with their finances. Talk to the lender and see what their attitude is – they may find a way to help you.

Suspending payments without an arrangement will adversely affect your credit profile, potentially for years to come.

Is it easier if someone’s applying with their partner or spouse?

It really depends on the partner’s circumstances. If the partner is contributing income or a deposit towards the purchase of the property, then quite rightly they would expect to go onto the deeds to the property and also onto the mortgage. 

But if that partner has adverse credit or a poor credit profile, that could adversely affect an application. If they are squeaky clean on their credit and they have earnings to contribute, then adding that partner onto the mortgage will certainly help matters. It all comes down to the spouse or partner’s income, expenditure and credit profile. 

How do lenders calculate the income of someone who’s on maternity leave?

It’s based on your annual salary before you moved on to maternity leave, and your plans once you come off maternity leave. 

If you’re going back part-time they’ll look at what your part-time salary will be, together with any commitments you might have. We’ll talk about self-employed people shortly, but if you’re employed it’s all about your return to work plans. 

Can you get a mortgage on maternity leave if you are self-employed?

It’s probably one of the few times with mortgages that it’s actually beneficial to be self-employed. 

When you’re employed, lenders are looking at your most recent month’s payslip or your most recent overtime or bonus. When you are self-employed, lenders look backwards at historic information – your company profits, your salary and dividends or your share of the profits if you’re in a partnership. 

Those are the figures they base their assessment on. So let’s say you’ve had two or three cracking years. You’ve got some really good accounts and you’re going on maternity leave for a year. The lenders will be using your earnings based on the last two or three years figures so there will be no problem. 

The issue could come in two or three years’ time, when lenders are again looking at historic information and they’re seeing that year on maternity leave. Profits for that year may be down – and that could adversely affect how much you can borrow from lenders at that stage. 

How can someone improve their chances of getting a mortgage if they’re on maternity leave?

The main thing is to monitor your credit profile. Make sure you’ve kept any credit arrangements up to date – check you haven’t had a late payment or a missed payment here or there. That will always help, whether you’re on maternity leave or not. 

Be open and honest with your lender – don’t try and hide information from them, just set it out in the right way. So keep your affairs in order and have a clear return to work plan. Perhaps your mum or dad or friends are going to help with childcare. Just make sure that you can set it out clearly for a lender when they ask the question. 

We love clients in all shapes and sizes, whether they’re organised or not. It’s a lot easier dealing with the organised ones because the information is all there. But we’ll always lend a hand to disorganised people. That’s fine. We just clearly set out what’s required and go from there.

How can a broker help me get a mortgage on maternity leave?

Brokers understand the mortgage market and the nuances from one lender to another. We know which lenders have a more relaxed policy on maternity leave than others. You could walk up and down a high street and get six different answers to exactly the same question. 

Or, you can talk to a broker who will review your circumstances, see what your plans are and come up with the best potential lenders for your situation, particularly when there’s a little quirk like this. That’s probably the completely wrong way to describe one of the potentially happiest moments in life, but from a lender’s perspective it is a quirk. 

So it’s really important that you take advice. I’d love it to be from Davidson Deem, but if not, just make sure you’re taking the right advice.

Your home may be repossessed if you do not keep up with your mortgage repayments.