Wondering what to expect for the home loan process when you’re expecting? Is it even possible to be approved for a mortgage in Australia while on maternity leave or parental leave?
And if so, will there can be extra hoops to jump through depending on which bank or lender you choose?
In this article, we’ll guide you through what to expect when applying for a home loan while on maternity leave.
We’ll break down:
- Maternity leave eligibility for mortgages and refinancing.
- Which banks and lenders are likely to approve your home loan application.
- What extra requirements you can expect during the mortgage application process.
- Tips to help you successfully prepare for your application.
- Home loan repayment holidays and concessions you may be eligible for.
Am I Still Eligible For A Home Loan If I’m On Maternity Leave?
The answer is yes, it’s possible to be approved for a home loan while on maternity leave or parental leave. However, there will usually be extra requirements and conditions attached, depending on the lender you decide to go with.
Lenders will see you as having a high-risk profile. That’s because your income and expenses are more likely to be affected when adding to your family. And this, in turn, could affect your ability to make home loan repayments.
That’s why you’re application process may be more trying. And you could possibly be faced with higher interest rates.
Applying for a mortgage can be stressful at the best of times. So adding pregnancy to the mix can make it challenging. That’s why many people wait until they return to work before refinancing or submitting a home loan application.
But if you’re keen to get that new home while you’re expecting, it can be done.
To make the process smoother, working with a reputable online mortgage broker, like YouBroker, can be a great idea. You can easily compare loan products and complete documentation from the comfort of your own home. And you’ll be backed by advice and assistance from trained professional brokers.
A mortgage broker can assess your financial situation to give you advice on the best types of loan products for you. They can also assist in you taking advantage of cashbacks and Government incentives such as first home buyers schemes.
Which Lenders Accept Maternity Leave Home Loan Applications?
Banks and lenders must conduct their business in strict adherence to Australian laws and industry standards. And it is stipulated that no bank or lender can refuse to approve your application on the sole basis that you are pregnant, or could become pregnant (in accordance with the Sex Discrimination Act 1984).
Lenders are also not able to enquire if you are pregnant. However, they can ask you if there are any expected changes in your circumstances that could affect your financial situation.
This is because loan providers are duty-bound to provide a mortgage that you can reasonably service. They want to make sure that you can meet repayments without putting you into financial strain.
At the end of the day, a bank or lender will not approve you for a loan if it is evident that you cannot service the loan amount. Your maternity leave and/or your partner’s income must be sufficient in order to meet your repayments.
Unpaid maternity leave is generally not looked upon favourably by lenders. It is often treated as unemployment even if you have proof of a return to work date with your employer.
Having a baby can shake up your finances (just ask any parent!). So it’s within your best interests to be open about your impending addition to the family. That way you’re more likely to be offered a loan that makes it possible to realistically meet repayments. Not doing so could risk putting you into a troubling financial situation.
Added Lender Conditions For Maternity and Parental Leave Applicants
There are many factors that can affect whether a lender will approve your home loan application. But a large consideration is your income, your expenses, and the likelihood that you’ll be able to meet mortgage repayments. And when you’re on maternity leave, your income and expenses can be impacted by the following:
- Whether your employer has robust maternity and parental leave available to you.
- If you have decided to take extended leave or a period of unpaid maternity leave.
- Whether you will be returning to full-time employment. Or will be reducing your hours to part-time upon your work return date.
- Childcare and other associated costs of having children such as nappies, cots, prams, and medical expenses.
Raising a child comes with a cavalcade of added costs. And lenders know it. In their eyes, you can potentially have less money to weather the storm of interest rate hikes and any financial calamities that may crop up.
In order to assess your home loan application, banks and lenders will want to see documented evidence of the following from your employer:
- The period of your maternity leave or parental leave.
- Your agreed return to work date.
- If your maternity or parental leave is paid, unpaid, or a combination.
- Any other terms of your leave and return to work agreement. Such as, if you will be returning to part-time or full-time employment.
Tips To Get Home Loan Approval While On Maternity Leave
When applying for a home loan while on maternity leave, you want to mitigate the perceived risk that you pose in the eyes of lenders.
Here are some tips you can implement to help you be a stand-out maternity leave, mortgage applicant.
Have a super-solid financial situation and healthy deposit
Work on having a glowing credit score and a decent-sized deposit. As with any applicant, this will make the home loan gods smile upon you more favourably.
If you can show you have the ability to save a good deposit and take control of your debt, it can boost your borrowing power. Having a big deposit also means you’ll potentially be borrowing less and have lower repayments. It can make it easier to get a lower interest rate.
Trim the fat on your expenses
A no-brainer. Cutting down on unnecessary expenses and implementing a budget is a wise move. It will show that you’re a savvy financial cookie who’s more likely to meet repayments.
Having a budget in place will also make it easier for you to navigate increased costs from raising a family. It can cement good financial habits and get you to pay off that home loan sooner.
A good mortgage broker, like YouBroker, can help you to work out a budget and assess your living expenses.
Have an emergency savings amount
An emergency savings amount shows you have the ability to save and says to lenders “oh hey, look how smart I am with my money.”
It will also provide a safety net for any surprise expenses. And with kids, surprise expenses can be aplenty.
Borrow with a partner or guarantor
Have you been knocked back for a loan? If possible, consider borrowing with a partner or guarantor. Having another income available or another to pony up on payments when you can’t, will lower the risk for lenders. It will make the scales tip more in your favour when it comes to approval.
Have all the required documentation on hand
Your paid maternity leave will predominately be treated as income by banks and lenders. And as with typical home loan applications, you’ll need to provide evidence of the amount of income you can expect.
You’ll also need to provide other documentation, such as:
- Payslips showing your income before maternity leave (usually 3 months worth).
- Paperwork from your employer showing your agreed-upon maternity leave period, your return to work date, and terms of employment for resuming work (e.g. part-time or full-time).
- An outline of your living expenses which includes the expected costs while on maternity leave, such as childcare, healthcare, and other child-raising expenses.
Do you want to be ready to rock and roll sooner on your home loan application? Then having this documentation primed and ready will help.
What About Refinancing While on Maternity Leave?
Refinancing is possible while on maternity leave or parental leave. However, as with applying for a home loan, you’re seen by banks and lenders as having a high-risk profile. The same conditions can crop up, such as:
- Potential higher interest rates.
- More requirements and additional documentation.
It’s a good idea to speak to your lender if you’re considering refinancing. They may be able to offer you a flexible arrangement to assist while you’re on maternity or parental leave. Options that may be available are a repayment holiday or interest-only repayments...
Which is what we’ll be covering next.
Repayment Holidays And Other Concessions For Parental and Maternity Leave
Dependent upon your lender of choice, you may have flexible options and concessions available to ease the burden of paying your home loan while on maternity leave.
Check with your lender to see if any of these options are available to you:
- Reduced repayment or repayment holidays.
- Interest-only repayment periods.
Some banks and lenders offer repayment holidays for specific life occurrences, such as maternity leave and parental leave, a death in the family, or serious illness. While some lenders will allow a period of interest-only repayments.
However, the requirements and conditions can differ from lender to lender. Some common eligibility requirements for repayment holidays and interest-only payments are:
- To have had the home loan for at least 12 months.
- To have made an acceptable amount of extra repayments to cover the reduced repayments, repayment holiday, or interest-only repayment period.
- Proof of your return to work date and the income you expect to take home upon your return.
The Wrap Up
Going on maternity leave doesn’t have to pump the breaks on your new home dream. But understanding that banks and lenders will see you as a higher-risk applicant means that you can plan accordingly.
Getting all your financial ducks in a row by cutting down on unnecessary expenses, and saving a healthy deposit puts you in good stead. And having all the required documents on hand and ready to go makes the process easier.
And if you need some assistance... Working with an accredited home loan specialist or mortgage broker, like YouBroker, can point you in the right direction. They can help you to choose a lender and loan product that suits your individual situation.
If you're interested in more articles on finance, real estate, lifestyle, and more, check out YouBroker’s blog.
Get Assistance With A Reputable Mortgage Broker
At YouBroker, we understand that purchasing a new home or refinancing can be overwhelming and stress-inducing. Particularly if you have a baby on the way.
That’s why YouBroker offers a convenient online experience with expert advice from reputable mortgage brokers.
YouBroker is fully accredited with an Australian Credit Licence. And we have the experience and know-how to assist people in varying financial situations to successfully qualify for a mortgage.
We can help you figure out:
- Your borrowing power, including factors such as DTI and Assessment Rates at each home loan lender.
- What budgeting tips to implement to assist with your living expenses declaration.
- What documents you’ll need for your application.
- Your best home loan options with lender home loan rate comparisons.
- Your funding position which shows key components such as Stamp Duty, the loan amount, and your down payment or equity.
- Lenders mortgage insurance, different home loan provider lending criteria, and other terms, requirements, or jargon.
- The pre-approval process, if you are eligible, and what to expect.
Whether you’re a first home buyer, are planning to go on maternity leave, are purchasing an investment property, or are after an owner-occupied loan... We can help you to navigate the real estate and loan process.
Get the support and information to advance confidently and make your great Australian home ownership dream a reality.
If you’d like to have expert broker advice and a convenient online portal at your fingertips, check out how you can get started with YouBroker.
