What You Need to Know About Mortgages and Parental Leave

If the title of this article caught your attention, chances are your family is growing.

Congratulations.

If you’re thinking now is the right time to move into a home that better fits your growing family—but you’re unsure how parental leave affects your ability to qualify for a mortgage—you’re in the right place.

Here’s the good news.

Qualifying for a mortgage while on parental leave is possible when it’s done correctly.

When you work with an independent mortgage professional, lenders can often qualify you based on your return-to-work income, as long as you can provide documentation confirming you have guaranteed employment waiting for you.

A word of caution
If you walk into a bank branch and disclose that you’re currently on parental leave, there’s a chance the bank will only allow you to qualify using your parental leave income.

That can significantly reduce your borrowing power.

Parental leave income is typically limited to 55% of your previous earnings, up to a weekly maximum. Qualifying on that amount alone can restrict your options and impact the type of home you can purchase.

Why lender choice matters
One of the biggest advantages of working with an independent mortgage professional is choice.

You’re not limited to one lender’s rules or products. Some lenders will allow you to qualify using 100% of your confirmed return-to-work income, which can make a meaningful difference in your approval amount and overall options.

What you’ll need to qualify
Most lenders will require an employment letter that includes:

• Employer name (preferably on company letterhead)
• Your job title
• Original start date (to confirm probation has been completed)
• Confirmed return-to-work date
• Guaranteed salary upon return

Lenders want reassurance that your income will resume once parental leave ends. You may also be asked to provide income history from the past couple of years, which is standard for most mortgage applications.

One important note
Whether or not you actually return to work after parental leave is entirely your decision. From a mortgage perspective, qualification is based on having a confirmed position available to you at the time of approval.

If you have questions about qualifying for a mortgage while on parental leave—or anything mortgage-related—please connect anytime. I’d be happy to walk you through your options and help you plan with confidence.