How does maternity leave affect remortgaging?
Remortgaging whilst on maternity leave can cause confusion and worry if you’re not sure how to approach this so we’re going to run through why this might affect your application and the approach we recommend you take.
Why does being on maternity leave affect my mortgage?
As a mortgage is directly linked to how much money you earn, your lender has to take into consideration things like maternity leave, when carrying out affordability checks on you. When you’re on maternity leave, your income is often reduced after a certain period of time which puts you in a different financial position. But this doesn’t mean that you won’t be able to remortgage.
It really does depend on the lender as to what evidence you might have to provide, and how this might affect your mortgage application. For instance, most lenders won’t directly ask if you’re currently on maternity leave, or are going to be soon, however they will ask questions about your future plans so you should be upfront and honest with them, especially as they’ll be asking to see payslips which will show if you’re receiving maternity pay from your employer. Being honest with your lender is important and keeping things from them can be classed as ‘non-disclosure’, which you don’t want to happen.
Once you tell your lender, they may ask to see what your payslips were before you went off on maternity leave. They might also want a letter from your employer with your return date (if you’ve decided this yet), and what your salary will be on your return to work too. More often than not, this will be sufficient information for the application to go ahead.
Should I tell the lender if I’m pregnant?
As a general rule of thumb, and going back to what we said about being open and honest with your lender, yes, you should let them know if you’re pregnant. But once again, what they decide to do with this information differs from lender to lender.
Admittedly, at some point in the future your finances are inevitably going to change, as you will have a dependent, but because the baby hasn’t yet arrived, some lenders don’t take this into consideration. However, it’s still important you tell the lender as they need to make sure you adhere to their policy.
Other options to consider
If you’re currently on maternity leave and would rather wait until you’re back in employment before you remortgage, that is fine. Just be aware that you’ll drop onto the standard variable rate (SVR), which means you could be paying more than you were previously. But you can come off this rate and remortgage once you’re ready i.e. you’re back at work and have a regular wage coming in.
Use a mortgage broker to remortgage
As we mentioned previously, each lender will have a different approach to maternity leave and mortgage approval. Some may deduct 50% from the amount they can lend you, and some might not change their lending amount at all.
Remortgaging whilst on maternity leave is possible, you just need to find the right lender whose policy you fit. At Mortgage Advice Bureau, we work with over 90 lenders and have access to over 12,000 mortgage products, so we’re perfectly placed to help you find the right mortgage for your circumstances. Our fully qualified advisers will listen to your circumstances and can make a recommendation that is specifically right for you.
Feel free to get in touch with us to discuss your mortgage needs, and we can put you in touch with an adviser local to you.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.