This is the ultimate guide to Maternity Leave.
So if you want to understand:
Maternity Leave Letters (including downloadable templates).
If you qualify for Paid Parental Leave.
And if you can buy a Home while Pregnant or on Maternity Leave.
Then you’ll love the actionable tips, and templates in this guide.
Let’s dive right in.
- Maternity Leave Letter
- Paid Parental Leave Scheme
- Buying a Home while Pregnant, or on Maternity Leave
- Applying for a Home Loan during Pregnancy
- Which banks will offer Maternity Leave home loans?
- Unpaid or Paid Maternity Leave: Does it make a difference?
- Is it possible to put my mortgage payments on hold?
- How can I set up maternity leave Home Loan?
Maternity Leave Letter
You will need to give your employer written confirmation that you intend to take some personal time off to have your baby.
In Australia, this should happen at least 10 weeks before your due date, and in a lot of cases happens much earlier (when it gets harder to hide that baby bump).
While you need to tell your work that you are going to be taking Maternity Leave at least 10 weeks before the expected date of your child, you must confirm your parental leave dates at least 4 weeks before taking your leave.
If you have to go on leave sooner, for example, if the baby is premature you are still entitled to take your leave, and you just need to tell your work as soon as you can.
Template for a Maternity Leave Letter in Australia
Some employers in Australia have strict requirements for letters requesting Maternity Leave.
Use the outline below to help make this process as smooth as possible:
Your letter should be:
- ✅ Dated
- ✅ Signed
- ✅ Contain your full name and address
- ✅ The expected date for leaving work, and when you plan to return.
- ✅ The expected date of birth for your bub, or if you are adopting the expected date of placement.
- ✅ If you like, include a medical certificate from your Obstetrician or Doctor confirming your pregnancy and expected arrival date of the bub. Mums will often not worry about including this with the letter, but your employer has the right to request this from you so it’s worth having on hand.
Usually, an email copy of the Maternity Leave Letter to your Manager or HR team should be acceptable.
Make sure you keep a copy on your personal email or print it out to have at home – so you have confirmation of everything in writing even when you aren’t in the office.
Paid Parental Leave Scheme
There have been some major changes to the laws in Australia which mean if you are the primary carer of a newborn or adopted child, you are entitled to 18 weeks paid leave.
Not only this, eligible working dads and partners (including same-sex partners) get 2 weeks paternity paid at the national minimum wage.
Your employer is required to provide 12 months of unpaid leave, providing you are. A permeant employee who has worked for at least 12 months before taking parental leave.
What are the criteria for Paid Parental Leave?
According to Centrelink, you need to be:
- ✅ In paid work, having received an income of $150,000 or less in the previous financial year
- ✅ Having worked continuously for at least 10, of the 13 months before the birth
- ✅ Worked at least 330 hours in that 10 month period
How much do I receive from Paid Parental Leave?
Providing you meet the eligibility criteria; you get paid the minimum wage of $719.35 per week (before tax) for up to 18 weeks.
Your partner could also be eligible under Dad and Partner Pay for up to 2 weeks, meaning you could receive a total of 20 weeks being $14,387.
Buying a Home while Pregnant, or on Maternity Leave
So you’re expecting a little bundle of joy.
But what does that mean for you and your home loan that you’ve also always dreamed of?
Do you have to choose between a baby and a home?
…Or why can’t we have both?
The good news is, that there are actually some lenders out there who will approve a home loan for you even if you’re not actually making an income.
And the even better news is that a maternity leave home loan is one example of this.
Can I get a Home Loan while on Maternity Leave?
Yes, you can get a mortgage while you are on maternity leave.
- ✅ Under the terms of a maternity leave home loan you can borrow up to 80 per cent of the property price and it can be as high as 90 per cent, depending on each individual case.
- ✅ If you are on unpaid maternity leave, you’ll need to have some money set aside to be used for making repayments.
- ✅ You are still eligible for special discounts, packages and offers even if you are Pregnant, or on Maternity Leave when applying for a mortgage.
So let’s unpack what’s involved in setting up maternity leave home loan and see if you’re eligible.
Applying for a Home Loan during Pregnancy
My number one tip is that it’s actually best to apply for a home loan when you are pregnant and are still working.
This cuts out a lot of the complication because it can be a lot harder for you to secure a home loan whilst on maternity leave.
Prior to this, sit down and create a clear financial plan before the baby arrives so that you’re prepared how you’re going to deal with the change in circumstances.
Remember that you’ll need a bit of extra money to move for the bad days too.
Prepare for the new bub, and consider a pre-approval:
- ✅ Apply for your home loan before the baby comes, if possible.
- ✅ Organise your finances and get a clear plan in place so that you know what you’ll be able to afford whilst on maternity leave.
Which banks will offer Maternity Leave home loans?
Unfortunately, the majority of the banks simply reject this type of loan application as soon as they find out you are on maternity leave.
Because they consider it risky – based on the idea that you may be able to not return to your job after pregnancy. There are also some banks that won’t accept maternity leave home loan application because they base the evaluation on current income – so be wary of this.
The good news is while lending policies for this type of home loan are stricter, we work with a number of banks that still offer a home loan to those who are on maternity leave.
Give us a call on 1300 088 065 or fill in our free online assessment and one of our mortgage brokers will call you to discuss your situation.
Documents required to apply for a home loan on maternity leave
In order to qualify for maternity leave home loan, you will need to provide the following documents:
- ✅ Evidence of income or employment, such as salary slips from three months prior to starting the leave. It also helps to have your group certificate, or PAYG summary showing your previous years income.
- ✅ A letter from your employer, which states that you are on maternity leave. The details of your employment after you return to your job should also be mentioned in a letter, along with the return date, working conditions for when you return (full time, or part-time), and be on your employer’s letterhead.
- ✅ Statements showing your savings held in your accounts, loans or investments.
- ✅ Details of any government entitlements you are currently receiving, like Paid Parental Leave or Family Tax Benefits
Assessment Criteria of a Lender
Some banks will consider using your return to work income towards your borrowing capacity, providing you can meet your commitments during any unpaid leave.
Below are some of the main things a bank takes into account when assessing your ability to repay the loan with larger importance being placed on your savings to make sure you have enough in the bank to cover any income shortfalls each month.
- ✅ The equity you have in your home
- ✅ The savings you have on standby
- ✅ Government benefits you are entitled to
- ✅ When you intend to return to work
The duration of maternity leave is also a key factor for banks when they assess your maternity leave home loan.
How long can I take maternity leave for?
The maximum leave period accepted by lenders is 12 months. However, if the duration is somewhere between four to six months, lenders consider it a more favourable option.
If the lender finds out that you are struggling to keep up with the home loan repayments during pregnancy, it is unlikely your loan will be approved.
So make sure you stay up to date with your finances and have a clear plan set in place over this period.
Unpaid or Paid Maternity Leave: Does it make a difference?
Compared to unpaid maternity leave, a paid maternity leave is viewed positively by banks. Obviously, it is a vast difference because you’re still making money each week.
But there is one issue; most employers only pay half of your salary when you are on leave, therefore lenders don’t evaluate the home loan based on a normal salary.
Therefore this can affect your application because your weekly income is much lower than usual.
Is it possible to put my mortgage payments on hold?
If you’re a bit further down the track then applying for a home loan and have actually already started paying your loan off then you may have a bit of equity in your home.
You might have had bub and want to look at putting your Mortgage Repayments on hold until you go back to work.
This is sometimes called a Repayment Holiday, Mortgage Safety Net or Repayment Pause.
What Options do I have for Repayment Holidays?
Assuming you are ahead in your repayments or have equity in your home is the best case scenario because what you could do is release equity to help you with the repayments.
This will also cover you for day to day expenses while you are on leave.
Some banks will allow you to increase your loan to cover the additional costs while you are off work but in this case, you cannot pause the payments but there is another option…
Get a 50% reduction on your home loan repayments
A repayment holiday is a home loan with a break of up to 12 months, reducing your mortgage repayments by up to 50% during this period.
Yet this offer is only available if you:
- ✅ Make extra repayments
- ✅ Have defined a return date
- ✅ Pay off extra money off of your home loan
- ✅ Always make repayment on time
What are the criteria to reduce my home loan payments?
Westpac Bank is one bank that offers the option to reduce your payments while on parental leave.
There are both positives and negatives to this:
- ✅ Your monthly loan repayment will be discounted for up to 12 months while on parental leave.
- ⛔️ Your loan balance will increase by the difference between the monthly interest charge, and the reduce monthly loan repayment during your parental leave period.
- ⛔️ At the end of the parental leave period, the repayment amount will be adjusted so that the new loan balance is repaid within the existing approved term.
- ⛔️ The maximum term for parental leave is 12 months per application, fees and charges might apply.
- ⛔️ This is only eligible for Westpac Home Loan customers who have been with the bank for over 12 months.
While this could be a good option if you feel financially squeezed while on Parental Leave, you are just delaying making the payment until when you return back to work so some caution needs to be exercised.
How long will it take to make up for my repayment holiday?
You could consider a repayment holiday as a bit of a break from repaying your loan, so consider that this will add another six to twelve months to your home loan.
Otherwise what you can do is start saving a year or two before you plan to conceive as it will release a bit of financial pressure off you during maternity leave.
So here are the options for you to get a mortgage on maternity leave:
- ✅ Taking a repayment holiday using your equity if you already have a home loan
- ✅ Speaking to the right lender to take out a loan during maternity leave
- ✅ Taking out a loan during pregnancy which will make it easier
How can I set up a maternity leave loan?
Speak to our team at Hunter Galloway to help you choose the best lender for you and go through all the options when setting up a home loan during maternity leave.
Our team of mortgage brokers will set up a free consultation to figure out which home loan option is best for you.