Moving house or buying your very first home can be stressful at any time in your life; however, buying a home while starting a family can certainly be daunting.
An exciting time yes, but only when you have everything in place, and you’ve secured the right and the best mortgage deal for you.
There are many things to think about when family planning and organising your finances. (Read more to know more about mortgage planning)
Below, we look further into mortgages while on maternity leave and some of the key answers to the most frequently asked questions.
Mortgages on maternity leave
Things you should be aware of when starting a family and applying for a mortgage:
Firstly, lenders do not have the right to ask if you are pregnant or currently on maternity leave. However, you can tell them.
Of course, you are under no legal obligation to let them know, but we do recommend that you’re upfront and honest.
This is because whether you’re planning to go on maternity leave, you are on maternity leave, or you’re going back to work but only part-time, your finances will be affected – which ideally lenders do need to know about.
Secondly, affordability will be reassessed. With any changes to your finances, how much you can afford to borrow and realistically, payback must be assessed. No one wants to be in a financial position where they borrow too much, struggle with the repayments, and put their home at risk of repossession. (At Mortgage Assistant, we provide a free mortgage calculator so you can estimate and check your affordability criteria before speaking to an independent mortgage advisor in Great Manchester.
What is mortgage affordability?
Mortgage affordability ultimately looks at how much you can pay towards your mortgage when all other expenses/outgoings have been taken from your monthly income. These `other` expenses can be anything from utility bills to weekly grocery shopping, gym memberships, and more.
Therefore, your affordability criteria will change if you are currently working but preparing to go off on maternity leave. Moving from full-time employment to statutory maternity pay, for example, can have a significant impact on your family’s finances.
You need to carefully examine this area and determine that if the mortgage payments are based on your full-time employed income; can you still afford these monthly outgoings if your salary drops to statutory maternity pay?
Being completely honest and transparent with your financial advisor is key.
Work out what your repayments could be on the mortgage you want with brokers in Greater Manchester you can trust.
At Mortgage Assistant, we can help you find that perfect mortgage advisor, matching you through our Find an Advisor tool.
Mortgages on maternity leave FAQ
Is it better to get a mortgage before going on maternity leave?
We understand the logic that when applying for a mortgage, two incomes can provide you with higher loan deals, but just because you can borrow more, does it mean that you really should?
If children are part of your long-term planning, think about the impact on your overall income when maternity pay comes into effect; if one partner returns to work part-time, etc. – now you have a reduced income but increased expenditure.
Could now be the perfect time to borrow based on the future you? Borrowing what you know, you will be comfortable repaying no matter what your circumstances.
Is Will having children affect our mortgage options?
Ultimately, all lenders want to know is your income and expenditure and when assessing all of this if you are in a position to repay the mortgage debt. In this instance, your expenditure could increase if you have to pay for childcare, your food bills and clothing allowances may increase, and more. Your income could also decrease if you decide to return to work part-time, etc.
Being as open and honest with your mortgage broker from the start is the best way to ensure you receive the best mortgage deals around.
Can you still get a mortgage while on maternity leave?
As long as you can evidence and prove that you have the financial means to meet the monthly repayments, then yes, you can get a mortgage while on maternity pay. However, you may face additional questions from some lenders, such as your expected date for return to work, will your working hours change, will you have additional childcare costs to account for, etc.
Can I save money in other areas to help support and top up maternity pay?
When on maternity leave, you can make savings as you will be entitled to free prescriptions and dental while you’re pregnant and for 12 months after the birth.
If you and your partner’s combined income is less than £50,000, you can claim Child Benefit payments at the full rate. For those earning between £50-£60,000, a proportion of child benefits can be reclaimed through tax.
You can also consider splitting parental leave and taking up paternity pay, splitting the allowance between you and your partner.
Working with a professional, independent mortgage advisor is vital, and that’s where
A mortgage Assistant comes in.
We help match you to the right broker in Greater Manchester who can meet your requirements, all through our Find an Advisor tool.
Check it out today: Find an Advisor in your area.