If you have decided to (or are planning to) start a family and you’d like to buy your first home, the last thing you want to worry about is whether or not a lender will give you a loan while you are on maternity leave. The good news is that you do have some options despite the fact that you may not be earning an income during this period.
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Approving a home loan whilst one of the applicants is on maternity leave presents a greater risk to lenders, as the applicants will be receiving minimal or no income for a period of time and there could be a chance that the applicant doesn’t return to the workforce. It is important to note that some lenders will use stricter lending criteria when assessing maternity leave loans. Get the latest information on maternity leave loans below.
What do you need for your income to be considered?
Recently, lenders have started to take a more common sense approach when it comes to accepting applicants who are on maternity leave. Your Mortgage Broker or Lender will usually ask for the following documents in order to assess your loan while you are on maternity leave:
Return to work letter – A employment letter from your current employer (the employer you have taken leave from) which states your anticipated return to work date, your tenure once you return (i.e. full-time or part-time) and the income you will be on once you do go back to work.
Latest income receipts – Lenders may ask for your latest PAYG Payment Summary (Group Certificate) from your current employer and/or the last available payslips.
Maternity leave pay – Some lenders will now consider your actual maternity leave pay from your employer and any pay you are eligible to receive from the Australian Government, especially if it is ongoing until you return to work.
How do lenders measure my ability to pay the loan without any income?
If you are on maternity leave and are buying your first home with your partner then it definitely makes it easier to get a loan because your partner’s income should be able to meet the repayments for the short period of time you are going to be without an income.
The length of time you have left before you return to work is an important consideration for most lenders. In order to determine your eligibility for a loan, the lenders will need to be satisfied with your ability to make the repayments if you are not earning an income during your maternity leave period. Therefore, lenders will want to see additional savings beyond your deposit to ensure you can use that money to make the repayments while you don’t earn an income.
Due to the above, it definitely makes it easier to get a loan if you are buying with your partner or if you have some sort of income during your maternity leave period.
Are you a family looking for your first home loan?
What is the best strategy to get your first home loan during maternity leave?
When it comes to your first home loan, one size doesn’t fit all! Therefore, it is important to consider your personal circumstances before deciding to obtain a loan during maternity leave.
If you are in the market for your first home and therefore are considering applying for your first home loan it is important to ensure you have enough in savings and enough left over in your bank account to ensure you can afford the repayments for your first home loan. We take a look at case study below to show how you can possibly get your maternity leave home loan.
Scott & Trish are married and with a 6-month-old baby – they’ve had enough of renting and would like to purchase their first home as soon as possible as their current lease expires this month. The couple has a good deposit of $60,000 saved Trish has been on maternity leave for 7 months and is expected to return to work in 3 months time. Trish has already received all her government maternity leave entitlements and the pay from her employer, therefore it would not be possible to use any of her income for the purposes of the loan.
The couple qualifies for a loan of $500,000 based on Trish’s return to work income and Scott’s current salary. They will be using $50,000 towards the deposit + associated costs of their first home and capitalising the Lenders Mortgage Insurance (LMI) onto their loan so they don’t have to make the payment for the premium upfront.
The additional $10,000 will be kept in the couple’s bank account to cover the loan repayments whilst Trish is on maternity leave as the monthly repayments will be approximately $2,200 per month – this will enable Scott & Trish to get unconditional approval on their first home loan.
Looking for more information or are you ready to apply now?
Here at FHBA Mortgages, our FHBA Brokers/Coaches have a great deal of knowledge in relation to which lenders are open to accepting applicants who are on maternity leave.
Are you currently in the market for your first home loan or need more information on maternity leave home loans? To get started or book your complimentary consultation with an expert FHBA Coach, simply complete the form below and your Broker/Coach will be in touch within 24 hours.
Disclaimer: The information on our website including this page is general in nature and should be solely relied upon. The advertised rates above were true and correct at the time of the publication. The rates do not take into account other fees and charges which you should also consider. The credit license responsible for the mortgage service offered to clients is Mortgage Australia Group Pty Ltd, Australian Credit License (ACL) number 377294, Australian Business Number (ABN) 99 091 941 749. Mortgage Australia Group Pty Ltd is a member of the Mortgage & Finance Association of Australia (MFAA). FHBA Pty Ltd is an authorised credit representative of Mortgage Australia Group Pty Ltd. You should seek professional advice when obtaining finance and purchasing your first property.