Fortunately, your homeownership plans don’t need to be scuppered - it is still possible to secure a mortgage if you’re on, or due to start maternity leave. While it’s true that some providers can be cautious about lending during this time, there are options available provided you seek the right advice.
This guide will be explaining the implications of maternity leave on mortgages, how your eligibility may be affected, and what to do to ensure you secure an affordable deal that suits your circumstances.
Can I get a mortgage while on maternity leave?While it’s very possible to get a mortgage if you’re on maternity leave, the terms on which mortgage providers are willing to lend are very much case-dependent.
For the most part, lenders will be happy to consider you, but how your borrowing limit is calculated will vary by provider and in accordance with your specific situation. A minority point-blank refuse to lend to anyone on maternity, whereas others attach strict stipulations to their agreements.
For these reasons, if you’re on, or due to start maternity leave, it’s important that you seek out a mortgage provider who is sympathetic towards your circumstances, and avoid those who reject or penalise such applicants with caveats.
This is where working with a broker can be invaluable; our team of experts know exactly which providers are willing to lend to applicants with non-standard income arrangements, and can point you in the direction of those best placed to approach.
How does being on maternity leave affect mortgage eligibility?The main reason maternity leave has an impact on mortgage applications is due to lenders’ concerns surrounding affordability. This is the assessment of your monthly income in relation to your outgoings that lenders use to determine your ability to repay the proposed mortgage amount.
Depending on your job, many applicants see a decrease in income when they take maternity leave. Some employers pay full wage, but many opt for Statutory Maternity Pay (SMP). If you’re self-employed, you may receive even less. This means that, in most cases, maternity pay is likely to have a negative impact on your affordability.
For example, if you normally earn £36,000 a year but are on maternity leave receiving SMP for 39 weeks, your annual income will work out as approximately £18,000. Your chosen lender might use this reduced figure, or some variation between the two, to calculate your affordability and borrowing.
That being said, there are lenders out there who are happy to base lending on your normal salary, provided you return to work once your maternity leave is up. In this case, you will probably be asked to provide supporting evidence, and future childcare costs will also be factored into affordability calculations.
How to get a full salary mortgage on maternity leaveIf you plan to return to the same job you had before going on maternity leave, chances are you’ll want to find a mortgage provider who is willing to lend a sum relative to your normal financial circumstances.
Your first port of call should be to discuss your circumstances with a broker who can recommend a suitable lender to approach. From here, you may be asked to provide a letter or reference from your employer confirming your projected return to work date, and the agreed terms to which you will be working - including number of hours and pay.
If there’s evidence to suggest that there will be no change to your post-maternity hours and earnings, many lenders will allow you to borrow based on your normal salary - though some require evidence of how you will cover the payments during this period of reduced income.
If you’re returning to work part-time or starting a more flexible role, ensure these details are evidenced so lenders can work them into their calculations.
What’s the maximum I can borrow for a mortgage on maternity leave?Much the same as any type of mortgage, the exact amount you will be authorised to borrow when on maternity leave will vary from lender to lender.
Most lender’s use income multiples as a starting point on which to base their lending. The majority will allow you to borrow between 3.5 - 4.5x your annual earnings, although some restrict this to less and others will stretch to more, depending on their specific criteria and your personal circumstances (e.g. credit history, deposit size).
As established, not every lender will take 100% of your pre-maternity leave income into consideration, so bear in mind the impact this may have on your borrowing capacity.
If, for example, your full-time salary before taking leave was £36,000 and you’re planning to return on a part-time basis taking home £18,000, the latter is the figure lenders would use to base their borrowing.
The table below highlights how much you could potentially borrow depending on varying income multiple caps, based on pre- and projected post-maternity income:
How much deposit do I need for a mortgage if I’m on maternity leave?Deposit requirements for applicants on maternity leave are no different than for normal mortgages, and will be dependent on the level of perceived risk you pose as a borrower.
10 - 15% of the property’s value is the typical minimum deposit size for residential mortgages, but depending on the strength of your application in other areas (e.g. deposit size, credit history, age, etc.), lender’s may have stricter, or more lenient, requirements.
In almost all cases though, the larger deposit you can save, the better chance you have of securing a competitive rate - especially if you work with a broker who can scour the full range of market deals available on your behalf.
Can I get a mortgage on maternity leave if I have bad credit?If you have poor credit history, it can be more challenging to find willing lenders and a competitive mortgage deal, especially if you’re working within maternity leave lending constraints.
But not all instances of adverse are viewed the same, and lenders are usually more interested in how long ago it occurred, and what steps you have taken since to better manage your finances. Even if you’ve got a county court judgement or bankruptcy to your name, there may still be hope - there are lenders out there specialising in bad credit mortgages.
To be in with the best chance of finding a lender that is willing to accept applicants with bad credit, and is sympathetic to your maternity leave borrowing requirements, speak to a broker. The experts can do what they do best: navigate the market to match you with a suitable lender to match your niche circumstances.
Can I get a mortgage if I’m self-employed on maternity leave?It is possible to secure a mortgage when on maternity leave if you’re self-employed, but it can be tricky. This is because the likelihood of getting approved for one, and on what terms, will very much depend on how much your leave will affect your business.
If you own a business but have employees that can comfortably keep it afloat in your absence, your maternity leave may have little or no impact. If your presence is integral in generating income and to the future prosperity of the business itself, there is likely to be big implications on affordability and mortgage eligibility.
Whatever your circumstances, it’s always best to have a chat with a broker to discuss your options. If you’re confident that your business won’t be affected by taking maternity leave, and can provide evidence to support your claim, there’s no reason a lender shouldn’t consider you for a mortgage - and our advisors can help find you the most competitive one.
Speak to an expert before applying for a mortgage when on maternity leaveIf you’re looking to buy a property while on or shortly due to start maternity leave, finding the right mortgage provider is critical. This will prevent you from approaching unsuitable lenders and potential damages to your credit file.
As there are so many hurdles to overcome, working with an experienced broker means you’ll be matched with not only the most competitive deal first time, but one that accommodates your financial requirements during and post-maternity leave.
To speak to an advisor specialising in helping people just like you, give us a call on 02380 980304 or request a callback via our online form.
Maternity leave mortgage FAQS
Do you have unanswered questions surrounding maternity leave mortgages? We’ve done our best to provide the answers to the most common queries we receive, but if you’ve got one we haven’t covered be sure to get in touch.
Do I have to tell mortgage lenders if I’m on, or due to start maternity leave?
Yes, you are legally obligated to declare any significant change in circumstances that could potentially impact your ability to repay your mortgage in the future.
Chances are, this could come to light anyway when the underwriters assess and cross-reference your application, and withholding such information could result in hold ups or mortgage offer withdrawals.
Being transparent and honest about your situation, whether you approach a lender directly or work with a broker, will also ensure you are best matched with an appropriate deal for your circumstances.
Should I tell a lender if I’m pregnant?
Although this is a bit of a grey area, it’s best to let a mortgage provider or broker know if you’re expecting, as this means maternity leave, and therefore a dip in income, is probably on the cards in the near future.
While you are unlikely to be asked directly whether you’re pregnant or not, this would be classified as a change in personal circumstances that could affect your ability to repay a mortgage in the future, so being honest is recommended if you want to avoid getting into hot water later down the line.
How will childcare affect my affordability?
Nearly every mortgage provider will take future childcare costs into account when carrying out affordability assessments.
If you’re looking to return to work full-time once your baby is born, lenders may be more than happy to authorise a mortgage based on your full earnings, but what you’re paying for childcare while you’re at work will be factored into affordability calculations.
Even if you plan to return to work part-time to facilitate child care once your leave is up, your baby will still be classed as a dependent, and the associated costs will be taken into account.
Will mortgage providers accept my full salary if I’m on maternity leave?
A large number of UK mortgage lenders are happy to at least consider a mortgage application based on your full salary while you’re on maternity leave.
However, there could be stipulations or caveats attached, which will depend on the individual lender and your individual circumstances. Some examples include:
No set criteria, lender determines eligibility on a case-by-case basis.
Approved for a mortgage based on full-time income, but maternity leave income used for the affordability assessment.
Written confirmation of your return to work date and terms from your employer required.
Mortgage only authorised based on full-time salary once you’ve returned to work after maternity leave.
Proof required that your mortgage is affordable, alongside other expenses, during and post-maternity leave.
Can I get a mortgage if I’m returning to work part-time after maternity leave?Yes, it’s very possible to secure a mortgage if you return to work part-time after being on maternity leave - provided you meet the income and affordability requirements, which would be based on a multiple of the projected part-time earnings you evidence.
Can I remortgage when I’m on maternity leave?
Remortgaging while you’re on maternity leave works much in the same way as it would if you were to submit a standard mortgage application.
Again, it’s a matter of pinpointing a suitable, flexible provider that is willing to base lending on the right income figures, and with no caveats attached - or if there are, ones that are workable for your circumstances.
How does paternity leave affect mortgage applications?
Many mortgage providers follow the same guidelines with paternity leave as they do with maternity leave.
Depending on the duration of your leave and the impact it has on your income and affordability (this could be especially significant if you’re a single parent or taking extended leave alongside your partner), your borrowing limit could be adjusted, and you may need to explain your repayment plan during the period of reduced income.
What happens if I’m unsure about my future work arrangements after my maternity leave is over?
Whatever your employment situation pre-maternity leave, it’s always a good idea to make a decision regarding when you will return to work and on basis (if at all) before applying for a mortgage.
This is important both for you and your lender, because without an idea of your projected future income neither one of you will know whether your mortgage is affordable. This could result in you defaulting on future payments, or having a lender decline your application in the first instance.