Maternity leave can be a challenging time in life, during which expectant mothers face a variety of unique and ongoing challenges. It can also be a time during which it is more difficult than normal to successfully qualify for credit.
When approaching maternity leave, it is common to experience the following concerns:
- Will maternity leave affect your eligibility for credit?
- Do you have to tell your lender you are on leave?
- How much can you borrow on maternity leave?
- What if you are a self-employed worker?
- How will additional credit issues impact your eligibility?
- What kind of deposit will I need to pay?
- Which other factors are considered by lenders?
At UK Property Finance, we offer specialist advice and support for borrowers both approaching maternity leave and already off work. For more information or to discuss your requirements in more detail, contact a member of the team for an obligation-free consultation.
Does Maternity Leave Affect Eligibility for a Mortgage?
The short answer is yes, though for reasons that are not entirely justified. Most major lenders simply assume that when you go on maternity leave, you take a significant pay cut while doing so. Employers are not legally obliged to ensure you receive 100% of your salary while away from work, though some make voluntary contributions to maintain their employees’ salaries. This is not always taken into account by major banks and lenders.
Many High Street banks consider applicants on maternity leave to be higher-risk clients than typical applicants. This is because a moderate proportion of those who go on maternity leave each year do not return to full-time work afterwards. Some take on part time work to dedicate more time to their families, while others choose not to return to work at all.
Maternity leave can affect your eligibility for a mortgage, but it is still perfectly possible to qualify for a competitive deal. It is simply a case of supporting your application with as much evidence as possible to convince the lender you are a low-risk candidate. Evidence such as:
- Proof of your intention to return to work
- The approx. date of your return to work
- The terms and conditions of your job
- How many hours you will be working and your salary
- A reference letter from your employer
Each of the above could help improve your eligibility for a mortgage on maternity leave.
Do I Need to Tell the Bank I am On Leave/Going On Leave?
It is not standard practice for banks and lenders to ask applicants if they are on maternity leave or approaching a period away from work. In theory it is your obligation to ensure you tell the lender if you are pregnant or already on maternity leave. Even if doing so affects your eligibility, it is essential that you do not hide this information.
This is because doing so could invalidate the terms and conditions of your loan agreement and render the contract void. It could also amount to the falsification of information or deliberate provision of incorrect/incomplete information. It is almost certain that your lender will find out you were pregnant and/or on maternity leave, at which point you could face problems.
Policies and criteria for eligibility vary significantly from one lender to the next. Irrespective of how it may affect your application, you must let your lender know that you are pregnant and/or on maternity leave.
How Much Can I Borrow if I am on Maternity Leave?
Your maximum allowance will be calculated in roughly the same way as any conventional mortgage. The lender you apply to will consider various criteria when determining how much you can borrow, including but not limited to the following:
- Your current annual salary
- Your reduced salary while on leave (if applicable)
- Your general financial position
- Your current debts and outgoings
- Your intentions for the money
- The size of the deposit you provide
- Your recent credit history
Your eligibility and the amount you are able to borrow may also be influenced by your partner’s financial status if you are applying for a mortgage together. In some instances the second applicant’s strong financial position and good credit history can compensate for issues and oversights on the part of the other applicant.
There are no specific limitations as to how much you can borrow. Depending on the lender you work with, you may be offered anything from 3X to 6X your annual salary. In the case of joint applicants, this could be up to 6X your combined annual earnings. You will also gain access to larger loans by offering a bigger deposit where possible.
What if I am Self-Employed and on Maternity Leave?
Many major banks and lenders throw additional obstacles at self-employed applicants. This counts double for self-employed individuals also on maternity leave, who may find their applications particularly heavily scrutinised.
Supporting your application as a self-employed worker means providing as much evidence as possible of your strong financial performance, your responsible financial history and the fact that you intend to return to work. If you are a sole trader, it can be difficult to prove your future intentions. If you run a larger business with other employees, lenders may assume your income and employment status will not be adversely affected by your maternity leave.
Underwriters often make it difficult for self-employed workers to qualify but not impossible. It is nonetheless important to ensure you target only the most appropriate lenders for your case. If you are self-employed and on maternity leave, it is highly unlikely your application will be accepted by a mainstream bank or lender.
Can I Get a Mortgage on Maternity Leave with Bad Credit?
Bad credit alone is enough for most major lenders to deny mortgage applications. It is comparatively rare for any mainstream bank to even consider applicants with poor credit. As you are also on maternity leave, you have very little chance of qualifying for a mortgage with a typical High Street bank.
This is why it is important to ensure you direct your applications at specialist lenders who consider clients on the basis of their overall financial position. Having bad credit and being on maternity leave does not necessarily make you a higher-risk applicant. If you are in a strong financial position and can comfortably afford the repayments on your mortgage, there is no reason why you should not qualify.
Every unsuccessful application you submit to a major lender could inflict more harm on your credit history. That is why we strongly suggest carefully considering your credit score and your overall financial status before applying for a mortgage.
However challenging your position may be, we can help. Even if you have been turned down for a mortgage elsewhere, there is a good chance you will find the help you need from an independent specialist lender. At UK Property Finance, we provide a whole-market brokerage service for applicants from all backgrounds. With our help, you will find it quick and easy to find the perfect mortgage to suit your requirements and your budget. Contact a member of the team at UK Property Finance anytime to discuss your requirements in more detail. Work out the costs of a mortgage using our UK mortgage calculator