Can I get a home loan while on parental leave?

Being on parental leave can feel like it puts borrowing on hold, because your income right now may be reduced or paused. But many lenders understand that this is temporary. Here is how lenders tend to approach borrowers who are on, or returning from, parental leave.

The challenge of leave income

While on parental leave you may be on reduced pay, on a parental leave payment, or on no pay at all for a period. Assessed on that temporary income alone, your borrowing power would look low, even though you have a job to return to at your normal salary. This is the situation lenders that accommodate parental leave are addressing.

Some lenders assess the return-to-work salary

Some lenders will assess your serviceability based on the regular salary you are returning to, rather than your temporary leave income, where you can evidence the return. This recognises that the leave is temporary and your normal income will resume. Whether a lender does this, and the conditions, varies.

What lenders generally want

Lenders taking this approach generally want confirmation of your return to work, such as a letter from your employer setting out your return date, role and salary. The clearer the evidence that you have a position and income to return to, the more comfortable a lender can be in assessing on that basis.

Childcare and expenses

Returning to work often involves childcare costs, and lenders may take these into account in your expenses, since they affect your real surplus once you are back at work. Being realistic about childcare and other costs in the assessment helps avoid a loan that is comfortable on paper but tight in practice.

Returning part time

Some parents return part time rather than full time, and lenders will generally assess the income you are actually returning to. If you are returning at reduced hours, that is the income a lender will consider, so it is worth being clear about your intended return arrangements.

Treatment varies by lender

How lenders handle parental leave differs, with some more accommodating than others. A conservative assessment from one lender does not mean every lender would treat your situation the same way, which is where comparing lenders is valuable.

Find a lender that fits your situation

Because treatment varies, the useful step is to match your circumstances to a lender whose parental leave policy suits. A broker can identify those lenders and present your return to work clearly, usually at no cost to you. This is general information, not advice.