Anything that has an impact on your earning power will affect your mortgage application and maternity leave is no different. Even if you plan to return to work as soon as possible, a lot of lenders will be reluctant to take your full salary into account and this could affect how much you’ll be able to borrow.
However, just because you’re on maternity leave, doesn’t mean you won’t be able to get a mortgage. By getting the right advice and by doing your homework, you should still be able to secure a loan and purchase your dream family home.
How maternity leave affects your borrowing power
In most cases, women earn less when they’re on maternity leave than when they’re in full time work. Though you may plan to go back to work as soon as you can, lenders will only take your current income into account. If you’re earning 50% less while on maternity leave, most banks will only offer you a multiple of this reduced amount, significantly decreasing your borrowing power and potentially putting your home purchase out of reach.
A reduced income will also affect how affordable your loan is deemed to be by your lender. Some lenders will take 50% of your normal salary into account, while others will only assess 30% and some lenders won’t take your salary into the equation at all. If they don’t think you’ll be able to meet your monthly repayments, they could decide to decline the loan, damaging your chances of securing a mortgage.
Getting your full salary assessed
Though most lenders won’t want to consider your normal salary if you’re applying for a mortgage on maternity leave, there are some that will. So if you need to apply for a mortgage while you’re on maternity leave, it’s well worth shopping round for a provider with a more flexible policy.
In some cases, getting your full salary assessed may involve getting a letter from your employer that states when you’ll be returning to work, the salary you’ll be receiving when you do and details of your working conditions when you’re back in the workplace.
Self-employed maternity leave
If you’re self-employed and going on maternity leave, your lender will want to know exactly how your time off will impact on your income. If you run a company that can function without you, there’s a chance your salary won’t be affected by your maternity leave. However, if you’re a sole trader, or if the business relies on your presence, banks will assume your income will be significantly reduced and may be reluctant to provide a mortgage.
The best way to find and secure a mortgage, while you’re on maternity leave, is to talk to a professional financial advisor. The team at Perception Finance have a lot of experience finding loans for people in a wide variety of circumstances, so will be able to help you secure the mortgage that’s right for you. Get in touch today to find out more.