Maternity Leave & Loans

Hi PropertyChat,

Have a question and wanted to hear everyone's thoughts.

I have a good friend whose recently had their first child. He is looking to purchase more investment properties but needed to use his wife's full time income. She will receive 3 months full time pay, government benefits and around 3 months of no pay before returning to work.

What are the dangers if he goes and applies for a loan and leaves out the maternity leave information?

As a broker I've strongly advised against this as when applying for loans he needs to declare any upcoming changes in his application and it's not something I will do for him.

What are the risks he is facing if he goes down this road?

To add, we have already explored banks with good maternity leave policies like ANZ etc.

Thanks,
Michael

 

Are they certain that wife will go back after 6 months? things could change once the baby gets out. If i was him id want to be confident that one wage can cover it. If wifey chooses to stay home longer than 6 mths it will push back buying further plus one wage + child will hurt serviceability.
I say do it... if the numbers stack up comfortably on one wage as it could be a while till next purchase. Would they then need to wait 3+ mths for payslips once wife returns to work?

 

Hi Michael

Do they have a sufficient amount of savings to cover the non paid mat leave period?

Does it service with ANZ or Nab?

Cheers

Jamie

 

Lenders have thought out their policies fairly well on this.

They'll accept maternity leave as servicing for as long as it lasts if there's evidence that the recipient will return to work shortly after the payments end. They'll also allow savings to cover a period without income. If you think it through, it's all very logical and reasonable.

If you can make a reasonable argument that the loan can be paid using various resources at all points in time, then there really isn't a problem. If there's a period where there aren't decent answers to the affordability question, then the loan probably shouldn't proceed.

 

So longer as the lender has a maternity leave friendly policy and you can support it with the necessary documentation like a letter from the employer confirming when the applicant is returning to work and the conditions of the work (i.e. full time, part time, salary, etc) then you wont have issues.

Having savings during the period to mitigate the interest payments is also an excellent way of strengthening the application.

 

What are the dangers of he leaves out the maternity leave information? Fraud, you could lose your accreditation.

I'm guessing it doesn't service with anz's policy? Looks like he is a bit stuck.

 

He services with ANZ, the other issue at play here is the valuation on the property came in under. So it's a combination of trying to find an alternative valuation source and one that has a good maternity leave policy.

Yes, to the savings component.

Ok, I have a few ideas. Thanks for everyone's input.

Cheers,
Michael

 

This discussion does bring up one interesting observation.

I've probably written over a thousand loans for couples over a long period of time. I'm not aware of a single instance where a client has had a property repossessed. I do know of a few who've been late but they always manage to get back up to date.

I also know that quite a few of those clients have had children since they bought their properties; many have even sent photos. In many cases, their serviceability was heavily reliant on both incomes. There's no way some of these client would have qualified for some of their loans even with maternity leave and a dependent child coming along.

Certainly they was no pregnancy prior to purchasing the property, but at some point afterwards, stuff happens.

It seems to me that when stuff does happen, people adjust. They trim their budget, work harder, family help out. People do get by. They don't simply stop making mortgage payments.

I'm not suggesting that people deliberately deceive lenders to qualify for loans outside of policy, but if I discovered that a client is going to have a baby sometime down the track, experience tells me to be happy for them, not to loose sleep over it.

Incidentally a client told me on Thursday they have a new son. Congratulations AT if you're reading this!

 

Order an upfront with nab broker and see how it goes - they're usually pretty good with mat leave if deal doesn't involve lmi

 

Agree with Jamie that NAB's maternity policy is awesome - plus I'm noticing that they are doing a lot more kerbside valuations instead of full valuations even at higher valuation points.

 

Cba and for PPR is ok unfortunately no go if investment.