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New mother Nina Young received a shock when she applied for a mortgage.

Confident in the 20 per cent deposit she and her partner David had saved for a two-bedroom apartment in Parramatta, they approached their bank but were rejected because Ms Young was on maternity leave.

“They told us to try again, closer to when I was going back to work,” Ms Young said.

With lending policies often understating the future income of mothers on maternity leave, new mothers may face a tough decision: spend time with their child or buy a home before the hot market prices them out.

For Ms Young even a freelance income, 18 weeks of government parental pay and a letter from her employer stating her intention to return to work, didn’t help.

Their borrowing capacity was assessed at a substantially lower amount than had her salary been included, and they found that suddenly, they were unable to buy.

The couple went back to renting – paying $100 more than their estimated mortgage repayments would have been.

Over the past year, prices have soared.

“Six months ago, we could have afforded to buy and now we’re looking in concentric circles away from the city to see where we can afford.” Full maternity-leave income not always considered

For those with a steady flow of maternity-leave income, not every lender accepts the full amount when calculating what applicants can borrow, said Michelle Coleman, principal of mortgage brokerage W Financial.

“I believe there is still an underlying perception that once [a woman] has children, mothers generally won’t want to return to work straight away, if ever,” Ms Coleman said.

Without a 20 per cent deposit, it can be even trickier, with borrowers needing to fulfil requirements for Lender’s Mortgage Insurance (LMI).

LMI provider Genworth considers 50 per cent of paid income on maternity leave and allows no income allowance where the maternity-leave pay period has ceased or no maternity-leave payment is received.

Some mothers may have to wait until they go back to work to buy a house, said Ms Coleman.

Others will want to try and base the loan on just their partner’s wages as l enders look to the net income available to make repayments, according to John Kolenda managing director of 1300HomeLoan.

For families where the mother is the highest earner or where both salaries are needed, lengthy maternity-leave periods pose a problem.

“When lenders assess applications, it is a snapshot of what is happening at that time. Things like upcoming pay rises and bonuses cannot be considered [for mothers on maternity leave] and your borrowing capacity will be determined by what you can prove as income,” Mr Kolenda said. Deferred payments sometimes an option

Some lenders have parental leave options that allow payments to be deferred.

“It is important to note that maternity leave scenarios are not black and white, and most lenders will take the application on its merits,” Mr Kolenda said.

Mortgage Choice head of corporate affairs Jessica Darnbrough said it is possible to obtain a home loan on maternity leave.

“While the most ideal time to apply for a home loan is before falling pregnant, often things don’t work out as planned. To obtain a loan when on maternity leave, the potential borrowers will not only have to show what the woman’s current income is, but they will also have to provide a note from her employer which details when she will return to work, what role she will have and the income she will earn,” she said.

Smartline mortgage brokers Katarina Matovina and Kevin Lee said it is a case-by-case situation requiring applicants to provide the lender with Centrelink documents, a letter confirming their intention to return to their previous role at the end of the period and evidence of their return to work income.

Those who are applying when on maternity leave should:

  • Try not to have a strong reliance on the maternity leave income in the application.
  • Have maternity-leave dates confirmed.
  • Look to have consistent maternity-leave income paid across the entire leave period, without any stretches of no income. While some opt for a certain period of half pay and some time with no pay, it’s more favourable to lenders to stagger the leave (for instance, a quarter pay over 12 months).
  • Build up as big a buffer as possible to assist when income is lower.
  • Use a mortgage broker who knows financial strategies around maternity leave and workshop your options.
  • Consider opting for ‘interest only’ during the leave time to provide flexibility.
  • Enquire with different lenders as to their policies.


Posted by Jennifer Duke – Domain (The Age) on 3rd June, 2015