Can you qualify for a mortgage while on maternity leave?

If you are starting a family, or plan to in the near future, this is an exciting chapter of your life! While it certainly means lots of change is coming, it also means you have a lot to look forward to. One of those changes may include moving to a bigger house so you have more room for your future children. However, how does securing a mortgage work if you are going through this process while on maternity leave? Here’s what you need to know about buying a home and getting a mortgage during your leave.

Can you get a mortgage on maternity leave?

First of all, is it even possible to secure a mortgage if you are on maternity leave? After all, your income will be much lower, and you won’t be experiencing a period of regular paychecks. The good news is yes, you can still apply for a mortgage in Canada while on maternity leave. Those on maternity leave are protected by laws that don’t allow lenders to discriminate against you just because of your leave status. However, you’ll still need to prove you are a creditworthy and reliable borrower. You will need to go through the usual steps to prove your ability to make regular payments, including the stress test and having a high credit score. Typically, we suggest striving for a score of at least 640!

Potential challenges

The main challenge of securing a mortgage is your reduced income during your maternity leave. When lenders evaluate you as a candidate, they examine your current income to help determine your eligibility as a borrower. Your income while you were working may have meant you could secure a $500,000 mortgage, for example. However, now that you are on leave, this approval amount is likely to go down. In some cases, lenders may reject your application altogether. It’s important to look at all of your options when trying to find the right lender and mortgage product! Your mortgage broker can guide you as you complete this process.

Using regular income for your application

The good news is you may be able to rely on your regular income to help support your mortgage application. If you are able to provide lenders with a return-to-work letter that guarantees you will be back at your job by a certain date, lenders can consider your regular salary as your income. Otherwise, you would be relying on your maternity leave benefits, which are much lower. This letter should include your employer’s name, your position, salary, start date, and your return date.

For self-employed individuals or those with non-guaranteed income (commissions, bonuses, overtime, etc.), the usual rules apply. You’ll need to provide T4s and Notice of Assessments. Assuming your income is impacted by your maternity leave, lenders might look at your income over a longer period of time. This gives them a more accurate picture of your regular earnings, and helps you prove your usual income is higher than your maternity leave income. Keep in mind this may result in higher interest rates!

Getting a mortgage while on maternity leave is certainly possible. A lot depends on your situation and your ability to meet lender requirements. If you need any guidance throughout this process, your mortgage broker is here to help you find the right lender and product!

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.