Expecting a new family member is a milestone most of us look forward to in our life. But it is also a time when couples want to secure a future for their kids.
So, if you are planning to purchase a new property for your growing family but are unsure how maternity leave will affect your mortgage application—this article is just for you.
Know whether your maternity leave will impact your ability to qualify for the mortgage or not and other important facts related to it.
Can maternity leave affect a mortgage application?
The simple answer is maternity leave does not affect your mortgage application. If you are pregnant, you can still qualify for the mortgage application. But in that case, it requires a letter of employment from the employer.
It includes your current pay rate, guaranteed hours, and return to work. Although you must know, the terms and conditions may vary depending on the lenders.
Mortgage rules for maternity leave
- A credit score over 640. If it is below that, it will require a strong co-signer—family members like parents, grandparents, siblings, or spouse.
- If you return to work within 12 months after closing, 100% of the income can be used for the mortgage loan.
- The mortgage loan will use 60% of the employment income if your return to work exceeds 12 months after closing.
- Have to submit a letter of employment, including a return to work date.
- If you are self-employed or work part-time, in that case, you have to use two years’ T4’s/NOAs to qualify for the percentage mentioned above.
- The lenders have no right to discriminate or prevent you from the mortgage if you are pregnant or on maternity leave.
In short, to get approval for the mortgage loan, you must show your assets, current income, and other liabilities to your lender. Moreover, it is important to research properly before finding a lender who will suit your current situation.
Requirements for the Letter of Employment
In order to get the approval, you need to submit the bank or financial institution a ‘return to work’ letter that states your current employment conditions. The letter must include the following points,
- Your job title and information related to income
- Expected return to work date
- Your starting date with the company
- A clause states you will return with your full employment income, regardless of the past years’T4s or NOAs.
- Must include the current date and contact information.
- Company letterhead is required
Frequently asked questions
Should I inform the mortgage lender I’m pregnant?
Your mortgage lenders have no right to ask whether you are pregnant or on maternity leave. However, lenders need to access your financial conditions to check if you can meet the repayments on your loans. It means they can ask if you are expecting any change to your current or future income status.
Is working with a mortgage broker will help me?
A mortgage advisor will help you apply for a mortgage pre-approval letter. Moreover, brokers can help find a suitable lender to fulfil your immediate requirements. You must know that showing a mortgage pre-approval letter is vital to qualify for the mortgage.
Can I apply for maternity leave as a part-timer?
If you are a part-timer with a guaranteed hour, in that case, you have to submit the same letter mentioned for a salaried employee. In the employment letter, you must include your pay rate, guaranteed hours, and your return to work date.
But if you work without guaranteed hours, then your lender will ask you for some information like your average earnings over the last few years. And you have to submit copies of the last two years of T-slips, income tax returns, and NOAs to qualify for the mortgage.
Can I apply for maternity leave if I am self-employed?
Well, just like the part-timer job, this process is also similar. The lender will check the average income over the last few years. Although, you don’t need to submit an employment letter. But you must provide the last two years of income tax returns and NOAs.
Purchasing a house and qualifying for a mortgage during your maternity leave is a wise decision when you are planning to start a family. However, you must know lenders in Canada may vary sometimes.
Some lenders will give 60 or 90 days of return to work. Some also ask for confirmation of your return date. So, do your research and find a good lender for the mortgage if you want to secure your future.