Switching mortgage products or remortgaging while on maternity leave can be very daunting for applicants. Fear of rejection and the stress of managing the process while taking care of a newborn is enough to lead many parents to avoid it entirely. If you have a mortgage, maternity leave may limit your options for remortgaging, but it doesn't make it impossible. In this guide, we will look at the process of remortgaging while on maternity leave and what you need to know.
Lenders are primarily concerned with affordability, so changes to your income will impact their assessment of your situation. Maternity leave will reduce your earnings, so it’s important to consider this if you are planning to remortgage. You may need to approach a lender with a more generous view of maternity leave to secure the best deal.
While your earnings might be reduced while on maternity leave, this doesn't mean you are unable to remortgage. Lenders recognise that maternity leave is a temporary change to your finances. And your expenses may change while on maternity leave, as you won’t be commuting or spending as much on entertainment. Lenders won’t ask if you are on maternity leave, or if you plan to take it in the future. But it’s helpful to be upfront about your plans from the start.
As always with a lending application, evidence is required. You can provide evidence of your maternity income through payslips, and you can also provide evidence that you have a job waiting for you at the end of your maternity leave. This could include confirmation of your return date and return salary from your employer. Sharing this information with the lender will help to avoid your income being classed as “non-disclosure”.
The short answer is Yes, banks are not allowed to discernment.
It’s helpful to let your lender know if you are expecting a child. This can help them to work with you to create a plan. For example, you might remortgage to an interest-only mortgage for a year while you are on maternity leave.
Lenders don’t penalise women for being pregnant, and they will work in your best interests. They simply don’t want you to take on a mortgage that will be unaffordable once you are on maternity leave and maternity pay.
If you would rather wait until you have returned to work before remortgaging, this is also an option. This will mean you will move from a fixed rate to your lender’s standard variable rate. This could increase your mortgage payments and make them less affordable, so always consider your options and the financial impact before making this kind of financial decision.
Working with a mortgage broker will enable you to get the best deal available. A mortgage broker can also lighten the load by taking care of the paperwork and ensuring everything is in order. Minor mistakes on your application can lead to rejection and this could mean you are switched to a standard variable rate mortgage.
Every lender will have their own approach to remortgaging while on maternity leave, but a mortgage broker will help you to handle this process with ease.
Working with a maternity leave mortgage broker gives you access to more lenders and insider insight into which lenders are most likely to accept your application. Brokers can also make it easier to secure a better deal as they will have up-to-date knowledge of the rates and fees offered by all mortgage providers, not just the popular high street lenders.