You can get a home loan while on maternity leave. Lenders look at two things: the income you are returning to (same role, same pay, full-time or part-time) and how long you will be on reduced or no pay. If there is an unpaid stretch, you will usually need savings set aside to cover the repayments until you go back.

How do lenders assess income while on parental leave?

Most lenders assess you on your return-to-work income rather than what you are earning during leave. To do that, they want proof that the job is there for you. That is normally a letter from your employer confirming your role, your return date, your hours and your salary when you return.

If you are going back full-time on the same salary, the assessment is fairly straightforward. If you are returning part-time, the bank will use the part-time figure, which can reduce how much you can borrow.

What about the unpaid part of the leave?

This is the second thing banks look at. Say you are taking six months on half pay followed by six months unpaid, or twelve months completely unpaid. During that time your income will not cover the loan repayments, so the lender needs to see how you will bridge the gap.

The usual answer is savings. Many lenders want to see enough money set aside, often called a buffer, to cover your share of the repayments and living costs until your return date. Some will also look at your partner’s income and whether it can carry the loan on its own during the leave.

When is the best time to apply?

There is no single right answer, but timing matters:

• Before you go on leave: your current payslips make the application simpler, but you still need to disclose the planned leave. Lenders are required to consider foreseeable changes.

• During leave: possible with a return-to-work letter and enough savings, but fewer lenders are comfortable.

• After you return: the simplest option, usually after one or two payslips back in the role.

Never leave planned leave out of an application. Lenders ask about it, and it is far better to structure the loan properly from the start.

A typical Melbourne scenario

Emma and Josh are buying a $780,000 townhouse in Mordialloc. Emma is a full-time physio planning twelve months of leave: three months on paid leave, then nine months unpaid. Her employer confirms she will return three days a week on a pro-rata salary of $54,000.

The lender assesses Emma on $54,000, not her current full-time salary, plus Josh’s income. Because there are nine unpaid months, they also need savings to cover Emma’s share of the repayments for that period. With that buffer in place the application works. Without it, they would need to borrow less or wait until Emma is back at work.

How can you make it easier?

• Get a return-to-work letter with your role, hours, salary and date

• Build a savings buffer for the unpaid months

• Keep credit card limits low and avoid new debts before applying

• Consider whether your partner’s income can carry the loan alone

• Talk to a broker early, because parental leave policies vary a lot between lenders

Key takeaways

• Banks assess you on the income you are returning to, not your leave pay.

• Unpaid leave needs to be covered by savings or a partner’s income.

• Returning part-time lowers your assessed income.

• Always disclose planned leave. A broker can match you with lenders who handle it well.

Check your numbers with our borrowing power calculator and budget planner, or talk to our mortgage brokers about home loans that suit a growing family. You may also find how life changes can affect your pre-approval useful.

General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.