A Quick Overview
|Customer||Savanna and Dieter, a couple|
|Customer Goal||To purchase an owner-occupied property|
|Problem||Savanna was on maternity leave and was only receiving half her pay during her leave period|
|LVR and Term||80% LVR (loan to value ratio), 30-years loan term|
|Income||$128,190 p.a. (Dieter) | $101,280 p.a. (Savanna)|
|Solution||Finding the perfect lender and finding a solution to cover their repayments during the maternity leave.|
Welcoming a new baby into the world is always a huge milestone for any couple. When a baby’s on the way, it’s quite natural to reconsider your financial situation or explore the possibility of getting a new home.
But you could find several hurdles while seeking approval for your home loan if you’re on maternity leave.
Lenders and banks generally find these kinds of deals risky, as they think you might have various doubts while on maternity leave:
- You might have a change of heart and be a full-time parent and not go back to work.
- You might have taken a pay-out and left the job, instead of taking maternity leave.
- You might have another baby.
- Banks can only assess your current income.
These are the last things you want to worry about while pregnant but, unfortunately, these issues remain top concerns for lenders.
Dieter and his wife, Savanna, had a difficult time getting their home loan approved when she became pregnant.
After being together for many years, Dieter and Savanna got the exciting news that they were pregnant.
They already had two properties: one where they were residing, which would be converted into an investment property once they settled into their new home; and the other an investment property. Both of these had mortgages, which they were paying off.
They wanted to welcome their baby and start their new lives as parents in a new home.
Both Dieter and Savanna were on decent income. They were certain their home loan would be approved.
But then came the hurdles.
Savanna’s maternity leave, their high DTI and high HEM
Although Savanna was earning a decent income, it was roughly halved during her maternity leave. Despite that, the couple could service their loan, but their Debt-to-income (DTI) ratio would go above 6, which is considered high risk.
The maternity leave also hurt their chances of securing a loan.
On top of that, their Household Expenditure Method (HEM), which shows their living expenses, was also high.
They were also going to have to juggle three mortgages with the addition of their new home.
A clever solution
Use your pre-maternity leave pay for DTI calculations
After having a difficult time getting their loan approved elsewhere, Dieter and Savanna contacted Home Loan Experts, where they got connected to our broker Mandy (Mandira Shrestha).
As a mother herself, Mandy understood the nuances the young couple had been facing. She listened to their story carefully and was almost certain that she could get their home loan approved.
After studying the couple’s case, Mandy got what she needed to address the uncertainty that came with the maternity leave.
Mandy used the maternity leave letter from Savanna’s employer, which outlined when she would be returning to work.
Meanwhile, Mandy used Savanna’s before-leave pay and their savings to ensure that the DTI remained under 6.
Mandy accurately showed to the lenders that the couple had enough savings to pay off their ongoing expenses and make the repayments on their new loan.
A happy ending: Maternity leave home loan pre-approved
Dieter and Savanna were over the moon after getting pre-approved for their new home.
They were relieved and overjoyed, after many brokers before Mandy had turned them down.
Can you get a home loan while on maternity leave?
When you’re on maternity leave, it can be difficult to find a lender but it’s not impossible.
Being on maternity leave should not lock you out of getting a home loan.
At Home Loan Experts, we know banks and lenders that have helped several clients on maternity leave find a home loan. Call us on 1300 889 743 or enquire online.