Charlotte Grimshaw is Head of Mortgages at Suffolk Building Society. She explains the options.
Expectant parents may decide to move house before their new addition is born in order to upsize or relocate to a better suited area. However, a common concern is whether or not you are able to obtain a mortgage whilst on paternity or maternity leave, and whether you will have access to the same rates as everyone else.
The good news is that obtaining a mortgage whilst on paternity leave is achievable and if you can evidence it is affordable, you can begin to prepare for the application process. If you are adopting a child, you should be treated the same way as those on paternity or maternity leave so the information ahead is also relevant in this scenario.
The lender will need to be confident that your finances prove your ability to afford the mortgage repayments. It’s important to answer all questions honestly in order to be sure that you truly can afford the mortgage both now and in the future. Some of the questions a lender is likely to ask include:
If your earnings will be reduced whilst you are on paternity leave, the lender may require evidence of easily accessible savings to cover any shortfall in affordability.
If all parties plan to return to work, the lender may ask about your anticipated childcare arrangements and whether this additional cost will be affordable when you return to work. Childcare costs can have a large impact on overall household expenditure, therefore could affect your ability to afford the mortgage repayments. If one or more applicant plans to reduce their hours on a long-term scale and will be earning less as a result, these revised earnings will be used for the affordability calculations.
When calculating mortgage affordability, many lenders will accept regular agreed payments, such as Child Benefit and maintenance payments. As for maintenance payments, the lender will likely require these payments to be backed by either a Court Order or by Child Maintenance Services. With all payments that are related to your children, lenders will take into account the age of the children during their assessment to make sure there is a sufficient period that the payments will have left to run in order to be considered within your application.
If you have fostered a child, foster income may be accepted by some lenders, but is likely to depend on whether your household has other sources of income.
A mortgage broker can help you identify which mortgage deal is most suited to your circumstances. In a situation of paternity leave where your finances are likely to have been affected, you may choose to enlist the assistance of a broker to direct you towards a lender who is likely to meet your needs.
It can be beneficial to look for a mortgage lender who undertakes manual underwriting as they will consider your application on individual merit rather than a ‘computer says no’ approach. Finding the right lender can be the difference between a yes or a no.