Deciding to move house whilst expecting a baby can be a daunting prospect, but many expectant parents choose to make the move in order to upsize, gain a garden, or relocate into a preferred area prior to the arrival of their newborn.
With this can come a few questions, like are you going to be able to obtain a mortgage whilst on maternity leave, and will you have access to the same rates as everyone else?
The answer to both of these questions is yes you should! Obtaining a mortgage whilst on maternity, paternity and adoption leave is possible, however, it’s worth taking the time to prepare to help the application run smoothly.
If you’re looking to move house whilst on leave, be sure to understand the terms of your leave and your maternity plans, the additional finances you can use for the affordability process, and the importance of finding the right lender for your circumstances.
- Understanding your maternity plans
A lender should never penalise anyone for being on maternity leave and should offer the same deals and rates. They must determine whether you can truly afford the mortgage repayments, both now and in the future, so if you are on maternity leave, or will be in the near future, the lender will need to know the terms of your leave.
The terms of your leave include how much you will be being paid and how long for. Be prepared to disclose this information, and understand that the lender may wish to contact your employer to gain confirmation of these terms.
The lender is likely to also ask whether you plan to return to work at the end of your leave, as this will obviously affect your future finances. If you plan to return to work, the lender may require details of any anticipated childcare plans and the costs associated with these. Be prepared to show the lender how you plan to afford these arrangements.
If your earnings will be reduced whilst you are on maternity leave, you may need to provide evidence of savings that can assist with your mortgage repayments until your earnings return to normal. These savings must be easily accessible and not tied up in a notice savings account or a form of investment.
- Evidence any supporting finances
Some regular payments may be accepted for mortgage affordability, so long as these payments have a substantial term remaining. It’s important to note that most lenders will only consider child benefit for younger children as the payments often cease at the age of 16, so most lenders will want confirmation that the benefit is payable for some time in order to include this income in affordability.
Maintenance payments may also be taken into account, but will again require a substantial term remaining. The lender may request that the maintenance payments have a formal agreement, backed by a Court Order or Child Maintenance Services to confirm to the lender that you will be receiving these payments over the agreed time period.
If you receive foster income payments, the lender may also take these into consideration, but most often they will require that the household has another form of income alongside this. Taking foster payments into account for affordability is lender specific, so if you plan to use this be sure to find a lender that will consider these.
3. Find the right lender for you
Many people on maternity, paternity or adoption leave choose to consult a mortgage broker to find a lender who will consider your individual circumstances and offer you a mortgage. Working with a broker is not a necessity as no lender should refuse you purely for being on leave, however, a broker can help alleviate some stress, finding a mortgage deal that is best suited to your circumstances.
Finding a lender who undertakes manual underwriting can be very beneficial for those looking for a mortgage whilst on leave. These lenders are more likely to consider your application on its individual merit, rather than relying on computer-based algorithms.
It is possible to get a mortgage whilst on leave, but being prepared for the affordability checks and sourcing the best lender for your situation can make the process run much smoother. There are plenty of lenders out there ready to assist you through the mortgage process so that you can relax and enjoy your new baby in your new home.
Charlotte Grimshaw is Head of Mortgages at Suffolk Building Society.