Re Mortgaging on maternity leave

[meow1989]

Just wondered if someone could help me with this.

My DH and I bought our house in 2014 using help to buy (20% deposit borrowed). We have always overpaid and have managed to reduce 35 year term by about 2 years on top of the 5 We have paid by doing so.

In March we come to the end of the first 5 years of help to buy and our option is to pay interest on the government loan or remortgage to cover the current value of the loan (as the 20% is of current house price) which out provide can offer.

We have had the house valued and our next step is to discuss remortgaging our current balance jus the 20% which will come to just under £195000. When I started enquiries with out provider, we worked on a worst case scenario of needing to borrow £204000 and the cost came out the same or lower than our current payment including our over payment, so is easily affordable. We plan to lock in for 5 or more years as the interest rate offers is low.

My only concern is that I am on maternity leave currently and am due to love to no pay from Feb until I start work again in June. I am also planning to reduce my hours to 3 days a week from 4. Do I need to declare this and will it affect our application? The amount of money needed is 4.85 times DH salary, so easily affordable for us both.

I actually have enough savings to cover not working for 8 months (although will obviously not be unpaid for this long, it will be 4 months), and have other savings that will cover the solicitor and admin fees (£200 for help to buy, joke) associated with paying off the government loan. is this a help in terms of application?

Sorry that's long!

You will very likely need to declare that you’re not aware of any reason why your income will fall. You do need to tell them about your plan to reduce your days.

Are you intending to apply using your husbands income only? If so, as long as there is no affordability issues, you should be fine not declaring it.

However if affordability is dependent on both of your incomes, then yes you will need to declare you are on Mat leave and the lender will more than likely ask about your intentions and return to work.

I'm an Underwriter for a high street bank so feel free to ask any questions

Thanks for the responses.

It's based on both incomes but I'm hoping that my husband's income alone would be technically enough on it's own (are banks still working on a max of 5 times salary?) Will count in our favour even though my wage will decrease, is that likely?

Most banks are still working with 5x income but might be worth checking your banks lending policy just in case.

If you are proceeding with both of your salaries, then affordability will be calculated on your reduced salary and they will ask to see evidence that you have savings to cover the shortfall when you are on nil pay. They will also ask for any childcare costs that will be incurred when you return and take that into consideration.

Do you have a contract for your new reduced hours? Is it something that's been confirmed? If not then bear in mind that your employer could turn this down. I wouldn't declare it until it was confirmed.

You use your current salary, which if you are on mat leave, is the same as before you left.

I moved on maternity leave. Told work and back I'd go back when smp ended but when mortgage in place then extended leave to include nil pay period. Seems u likely that would work for you given dates, but you might be able to do something.

I spoke with my employer today on a separate topic and they told me they had been expecting me to drop to 3 days so 22.5 hours. I think ill do 24 hours and they were more than happy with that so although not confirmed, they're working on a worst case scenario of me only being there 3 days and any extra is a bonus.

I actually called our provider today and we were approved for the extra funds on the salary I expect to work on and now have an agreement o principle. DH and I have also sat and budgeted this evening and are doing ok.

We'll extend our term from 28 years to 35 and stop over paying, then when DS is entitled to his free nursery hours we will use the money saved on child care to over pay and hopefully cut the term back down. We will lock in for 5 years and see if term can be further reduced when that's up.

Than you for the quick responses to my panicked inability to sleep over this at 3am this morning!!

Just remember and Agreement in Principle is still not a guarantee you will get your mortgage. It may still need approval by the underwriting team who will need to see evidence you have sufficient savings in place to cover the shortfall

OP I remortgaged onmat leave but your adviser will need to be v knowledgeable as my first told me I couldn't do it all leaving me on SVR for 2 years. Another got me one w Woolwich within 3 wks. I think they wanted a letter from employer confirming I was currently a full time permanent employee & my salary.
Then a few months ago I remortgage on same mortgage deal w Woolwich when my salary was now less than half what it was due to part time salary.
DH salary never taken into account.

Just check the interest rate on the mortgage is less than the rate on the help to buy loan. We could re mortgage to buy our remaining 30% but we’d be paying more in interest than we are now, so instead we are just overpaying on the mortgage and paying the interest on the other part - we pay off more this way than we would be if we remortgaged.

I might be wrong, but we’ve been looking at a lot of mortgages at the moment and the vast majority of banks are not working at 5x. They’re 4.5x max.

We were TTC while house hunting and it didn't end up happening before we moved but my mortgage advisor told me they have to use your pre mat leave salary - they're not allowed to take you being on mat leave into account any more as it's discrimination. They can ask about any expected change in your hours / earnings though. But who's to say you'd made that decision yet?!

@boxofchocs the interest onnhelp to buy is just interest though, not actually paying any of the loan off and it rises by a percentage each year

We saw a mortgage advisor for similar reasons recently. We were told that if I could provide payslips from before mat leave, and my work could provide a letter to state that I was going back, and what my hours and pay are going to be upon return, them that will be sufficient

When I was on maternity leave we enquired about a new mortgage. They were happy to accept previous payslips and a letter from employer confirming my return salary. However as previous people have said when they do the affordability check they deduct loans, pension contributions and childcare. There might have been some other stuff they would deduct but it wasn't applicable to us. We were fucked so didn't move in the end.

@meow I know it’s only paying the interest, but you still have to pay that interest when it’s on the mortgage. We pay £100 a month interest. But if we remortgaged the interest rate is actually higher, and so that £100 wouldn’t cover all the interest. It took me a while to get my head round it.
In order to be actually repaying that extra bit we’d have to pay significantly higher than the £100. And so it pays off more capital to chuck over payments at the mortgage until the interest rates meet.

So the lender didn't alter my salary o the credit/affordability test which means that despite the fact that the monthly payment would be 90 less than we pay now and we would have and excess of £800 A month they will only lend 39000 and only if we can magic up 14000. We don't have that.

Im gutted, especially as We can afford it and by not getting this well be paying 60 a month interest gr8 nothing on the help to buy (then 120 the year after, 180 the year after etc).

How is 800 a month spare cash not adequate?!

Can you shop around for another lender. London & Country are very helpful and free!

Are you sure it goes up from £60 to £120? Ours only goes up about £5 a month per year and we pay £100 per month. It doesn’t go up a whole percentage point per year.

Maybe I've misunderstood the increase in interest then as I'm sure it's the same for all?