Can you get a home loan on maternity leave?
Moving house with a newborn can be daunting enough without throwing a new home loan application into the mix.
When you’re on maternity leave, the lender may have some hesitation about approving your home loan as borrowers on maternal leave are deemed high risk.
So can you be approved while on maternity leave?
Here are some of the things you should know about applying for a home loan on maternity leave and whether it’s actually possible.
How could being on maternity leave affect your loan application?
Applying for a home loan while on maternity leave will be slightly more work than usual.
Borrowers who are not working at the time of applying for a home loan are deemed as high risk to the lender because their capacity to make home loan repayments can be impacted. Although most parents on maternity leave receive paid leave benefits, the amount earned is generally a lot less than their usual income. As a result, their borrowing power will most likely be affected.
But this doesn’t mean you can’t be successful in applying for a home loan while on maternity leave.
When you begin the application process, the lender can take into account your income, expenses, assets (rental properties, investments), savings, liabilities, and whether you’re borrowing with another person.
Lenders will also want to know whether your maternity leave will be paid or unpaid. If you’re going on paid leave, this will give you a better chance of approval.
While some lenders are happy for borrowers to apply for home loans on maternity leave, others simply are not. Again, this is because you’re seen as a high risk borrower due to your little to no income and the fact that you may not return to work for the foreseeable future.
Ultimately, it all comes down to the lender and whether their policies allow for home loan applications while on maternity leave.
What documents do you need to provide?
When applying for a mortgage while on maternity leave, there are specific requirements you must fulfil along with evidence/documentation you must supply to prove to the lender that you’re capable of making repayments. Along with all the usual home loan documentation, you may be required to provide:
- Recent payslips from the last three months prior to your leave
- A letter from your employer stating the details of your absence including the return date, tenure, and expected income
- If required, you’re partners income
- Whether your parental leave is paid or unpaid. If paid, the amount you will receive during the leave period
- Documentation explaining the living expenses you will be required to pay while on leave e.g. childcare, utilities, healthcare, etc.
If you’re still a little uncertain about the process or what is required of you, talk to one of our home loan specialists today to get a better idea of what a lender looks for.
What factors do lenders take into account?
When lenders are looking at lending to parents on maternity leave, there are a couple of things they will consider before approving your application. Firstly, they will consider the duration of your leave. Generally from a lender’s perspective, maternity leave should not last over a period of 12 months.
In essence, the shorter your leave the higher the chance you will be approved.
The second thing the lender will look at is your ability to cover the loan repayments. For this, they will review your savings, the equity you have in your home, and the government benefits you will receive in order to make their decision.
Use the loans.com.au handy home loan repayment calculator to find out an estimate of what your monthly mortgage repayments could be.
Can you refinance your home loan while on maternity leave?
If you already have a home loan but you’re looking to refinance while on maternity leave, you may be wondering whether you will be approved.
While refinancing on maternity leave is possible, a borrower will again be viewed as high risk in the lender’s eyes. Subsequently, this may either affect your chances of being approved or incurring a higher interest rate.
At loans.com.au, we’re here to help. Chat to one of our friendly lending specialists to find out more about getting a home loan while on maternity leave and the likelihood of your loan being approved.
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
