Securing a mortgage while on parental leave can feel like an impossible task, but it’s actually a common scenario for homebuyers. Adding a new member to the family often means more space is needed. However, because for most parents this means a temporarily reduced income, they worry that this will derail their mortgage plans.
The good news, it’s perfectly possible to get a mortgage while on maternity, paternity or adoptive leave, so long as you opt for a lender that suits your needs. Here we highlight the challenges that come with this type of application below, and how to overcome them.
How do lenders assess your income?
The biggest concern for lenders is affordability, no matter what the borrowers’ circumstances. When it comes to parental leave, most lenders view this as a temporary change in circumstances, so long as you can prove when you’ll return to a full income.
Income from family-related leave, for example, Statutory Maternity Pay, is often significantly lower than your usual salary. Which means that lenders generally take one of three approaches when assessing your income:
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Future salary: Many lenders will base their affordability assessment on the full salary you will receive once you return to work. They usually require a letter from your employer confirming your return date and salary
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Maternity/paternity/adoption leave income: Some lenders are more conservative and will only consider your actual income during the leave period. This can significantly reduce your borrowing capacity
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A combination: Some lenders assess affordability using parental pay in the short term, but with a return to your full salary for the remainder of the mortgage term
Getting approved based on future salary
A lender that uses your future salary is most likely to be able to lend you the mortgage loan you need, but they may still want to see how you’ll afford the mortgage during your leave. You can often demonstrate this through:
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Savings: Showing a cash buffer to cover the shortfall
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Partner’s income: Using the joint income of a partner who is still working full-time. It’s generally much easier to get a joint mortgage if you’re expecting a period of parental leave
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Government benefits: Factoring in government benefits, such as child benefit or tax credits
What if a couple plans to take shared parental leave?
If both parents are planning to take the parental leave available to them, it’s not usually an issue, so long as it’s staggered. It can be more of an issue if both parents plan to take the leave at the same time and for a substantial period.
If both parents are likely to be on long-term reduced or unpaid parental leave then it’s highly likely that lenders will want proof of some form of contingency income, such as savings. It’s a good idea to provide a clear timeline of which partner is returning to work and when, as well as how much their respective salaries will be reduced.
What if a new parent plans to return to work part-time?
If you’re planning reduced hours, lenders may be more cautious and only consider your new, pro-rata part-time salary. This can be less problematic if you have a partner who will support the mortgage.
However, you must be upfront about this type of intention, as your employer’s reference will need to reflect your new hours and pay.
How different lenders approach parental leave
Most major UK lenders are surprisingly flexible when it comes to this very common life event. They are often willing to use your return-to-work salary to calculate affordability.
Below is a breakdown of the parental leave policies of some of the top UK mortgage lenders:
|
Lender |
Income assessment policy |
Evidence required |
Key parental note |
|
Uses future return-to-work salary |
Employer letter confirming return date and salary |
Very flexible; often seen as a top choice for new parents |
|
|
Uses future return-to-work salary |
Letter from employer confirming terms and income |
Will specifically ask for future childcare cost estimates |
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|
Bases loan on pre-leave salary |
Last 3 months' payslips before leave began |
One of the most generous; doesn't always require an employer letter |
|
|
Uses future return-to-work salary |
Latest payslip prior to leave showing full salary |
If hours/pay are changing, an employer letter is mandatory |
|
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Uses future return-to-work salary |
Employer letter confirming return date, salary, and hours |
Tends to be stricter on documentation than Halifax or NatWest |
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Often uses pre-leave salary if terms are the same |
3 months' pre-leave payslips + confirmation of return |
May ask for proof of contingency savings for the leave period |
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Uses future return-to-work salary |
Employer letter; return date must be within 12 months |
If leave is 3 months or more, they may check savings and or partner income |
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|
Uses future return-to-work salary |
Employer letter confirming return date and salary |
Flexible approach to manual underwriting for complex cases |
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Uses future return-to-work salary |
Employer confirmation of return date and income |
Very manual assessment; good for non-standard employment |
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Accord (YBS) |
Uses future return-to-work salary |
Signed declaration of intent to return and employer letter |
Includes potential childcare costs in the final stress test |
Begin your mortgage journey
Documents required when you’re pregnant or on maternity/adoption leave
If you’re expecting or plan to use parental leave soon, you’ll usually need to provide a bit more information with your mortgage application. This could be some or all of the following, depending on the specific lender’s criteria:
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Payslips showing maternity/paternity/adoption leave pay
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Your latest P60
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Your employment contract
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A letter from HR confirming the date you’ll return to work and your salary upon return
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A signed declaration that you plan to return to work
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Bank statements
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Proof of savings or a similar contingency income
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Details of any future childcare costs such as childminder fees
While most lenders won’t ask for all of the above documents, having them to hand can prevent any issues or delays during your application.
Impact of Childcare Costs
While lenders are generally happy to use your return to work income, they will likely ask for your expected childcare costs after you return. This type of cost can significantly impact your long-term affordability.
Lenders treat nursery fees and childminder costs as a commitment, in the same way they would a loan. For many people, their return to work is entirely dependent upon paid childcare, and a typical £1,000 per month nursery bill could reduce your maximum loan amount by tens of thousands of pounds.
As childcare is often the second-largest monthly expense after the mortgage itself for many parents, some lenders stress tests your affordability based on these fees. Most lenders allow you to declare your net cost, which is the amount you pay after any government subsidies.
Lender childcare policies
As with parental leave income, lenders treat childcare expenses differently depending upon their own criteria. Here are how some of the top ten UK lenders view childcare expenses on a mortgage application:
|
Lender |
How Childcare is Calculated |
Treatment of Free Hours (Government subsidy or family) |
Evidence Required |
|
Halifax |
Uses actual monthly cost declared by the applicant |
Accepts net cost |
Latest bank statement showing nursery payment |
|
Nationwide |
Uses future estimated cost for return-to-work |
Accepts net cost |
Confirmation of future childcare arrangements |
|
NatWest |
Deduced from disposable income |
Exempt if using free family care |
3 months' bank statements or nursery letter |
|
Santander |
Captured as a fixed monthly commitment |
Accepts net cost |
If the cost is £0, no deduction is made |
|
Barclays |
Included in essential expenditure. |
Accepts net cost |
May require a letter if costs will change post-return |
|
HSBC |
Factors into total monthly commitments |
Accepts net cost |
Strict on bank statement matching declared cost |
|
Virgin Money |
Uses anticipated future costs |
Accepts net cost |
Employer letter or nursery contract for return date |
|
TSB |
Standard affordability deduction |
Accepts net cost |
Latest bank statement showing the outgoing |
|
Coventry BS |
Manual assessment of commitments. |
Very flexible with future cost reductions |
Will discuss future school age cost drops |
|
Accord (YBS) |
Deduced from gross income multiplier |
Accepts net cost |
Requires confirmation of any childcare vouchers |
Free and subsidised childcare
If you get free childcare due to family support, some lenders will allow you to include zero childcare costs, but it’s important to check individual policies on this.
When declaring childcare costs, ensure you declare the amount that leaves your bank account. For example, if your nursery bill is £1,000 but you use the Government Tax-Free Childcare scheme (where you pay £800 and the government adds £200), you only need to declare £800 to most lenders.
If you will soon qualify for 15 or 30 free hours, which reduces your childcare spend, or your child is due to start a free state school, be sure to inform the lender. Many lenders will factor this imminent reduction in your outgoings into your future affordability.
Tips to improve your chances
Becoming a parent is an incredibly common life event that all mortgage lenders expect, but during this type of change, they can be a little more cautious. The following tips should help you to improve your chance of securing a mortgage before or during an ongoing period of parental leave:
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Speak to a broker: Because every lender has different rules a whole of market broker like ourselves can match you with the most suited to your circumstances
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Apply early or late: If possible, securing your mortgage offer before you start your leave, or once you have a confirmed return-to-work date can be easier than when your plans are uncertain
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Provide proof of return to work: Having proof of a confirmed return to work date and salary, as well as having an established period in your current career or with the same employer can put you in a better position
How Money Helpdesk can help
Whether you’re planning to start a family imminently, or are already on the way to having one, it’s a good idea to let an experienced broker guide you through the mortgage application process.
Whether one or both parents are planning to take maternity, paternity or adoptive leave, we’ll help you find the lender who is most supportive of your situation. At Money Helpdesk, we specialise in matching parents with lenders who offer the most flexible affordability criteria.
Ready to find the best deal for your growing family? Get started for a free, no-obligation chat with a friendly expert today.
FAQs
Generally, no. Lenders look at the financial impact of the leave, no matter what type of parental leave it is. However, because paternity leave is often shorter, lenders may be more likely to ignore the temporary income dip and simply use your standard salary.
Getting a mortgage while on adoption leave is broadly similar to applying while on maternity or paternity leave, as UK lenders generally group these under the umbrella of "Parental Leave." However, there are a few distinct nuances that adoptive parents should be aware of to ensure their application remains on track.