Babies are a lot of work. That’s a large part of the reason why parental leave is so valuable. It allows parents to concentrate on parenting. At the same time, life does go on and new parents do need to keep on top of it. With that in mind, here is a quick guide to (re)mortgaging and parental leave.
Lenders are concerned about affordability
The first point to tackle is the elephant in the room. Lenders are required to examine a borrower’s ability to repay a mortgage. Parental leave and the expenses of having a baby can both significantly impact a borrower’s ability to pay. They can therefore make it harder to get a mortgage.
There is, however, a clear difference between “harder” and impossible. In general, the key to success is to understand the obstacles you are likely to face. Then you can work to overcome them. In general, and as is often the case, the better your advance planning, the easier the change is likely to be.
Planning ahead impresses lenders
When lenders assess your ability to pay, headline figures are only part of the story. They also look at your ability to manage your finances. In the context of mortgage applications, this means a lot more than “just” paying your bills in full and on time. That said, this is an excellent place to start. It also means showing that you’ve thought about what the future might bring.
For example, if you’ve been planning on starting a family, have you been saving hard to build up a significant “cash cushion”? Once your parental leave is over, do you have a plan in place for childcare? If so, how are you going to finance it? Be very careful about relying on family help. Your family may be willing but they are not guaranteed to be able, especially when it comes to grandparents.
Have you been able to build up an income stream outside of employment? If so, can you feasibly continue with it while also caring for a baby? How much income can you realistically generate from it? Do you have any other assets you can monetize, even temporarily, like a spare room?
Don’t blow your deposit on the baby
There are certainly some items you’ll need for your baby, especially if you’re a first-time parent. Keep in mind, however, that new parents are prime targets for advertisers. Ignore paid-for promotions. Go onto real parenting groups and find out from other parents what you actually need and what you don’t. Also, try to buy pre-loved as much as possible.
Consider your timing
This may not be an option for everyone on parental leave. It is, however, at least worth considering if you can. The last trimester of pregnancy and the first three months of a newborn are both joyous and exhausting. If you can’t sort out your mortgage before that time, then it might be easiest to wait until later.
Usually, by the time babies are about three months old, they are starting to develop a more predictable rhythm. They also tend to sleep for longer at a time, particularly at night. Both of these changes can make it a lot easier for parents to organize non-baby-related aspects of their lives. It will also give a potential lender a better idea of how you’re managing your finances now that you’re parents (again).
Use a mortgage broker
Even if you tick every box as an ideal mortgage candidate, it can still be worth using a mortgage broker. Firstly, it can save you time. For new parents, there’s probably nothing more precious. Secondly, mortgage brokers really can suggest deals you might never have found yourself. For new parents, this can be literally invaluable.
For mortgage advice, please get in touch