Can You Get a Home Loan While on Maternity Leave or Parental Leave?

Can You Get a Home Loan While on Maternity Leave?

Applying for a home loan while on maternity or parental leave? Learn how Australian lenders may assess return-to-work income, paid leave, savings and childcare costs.

Yes, you may be able to get a home loan while on maternity leave, paternity leave or parental leave.

The challenge is that lenders do not all assess parental leave income the same way.

Some lenders may use your return-to-work income. Some may use the income you are actually receiving during leave. Some may need evidence that you have enough savings to cover the period where your income is lower. Others may limit the policy to borrowers returning to work within a certain time.

That means two borrowers on parental leave can get very different outcomes depending on the lender.

This guide explains how Australian lenders may assess a home loan application while you are on parental leave, based on current policy research.

Topics Covered

• Can you get a home loan while on maternity leave
• Home loan while on parental leave Australia
• Mortgage while on maternity leave
• Can banks use return to work income for a home loan
• Home loan application while pregnant
• Getting a mortgage before returning to work
• Home loan while on paid parental leave
• Can I refinance while on maternity leave

Why parental leave can affect a home loan application

Parental leave creates a timing issue for lenders.

Your long-term income may be strong, but your current income may be temporarily lower. You may be receiving employer-paid parental leave, government parental leave pay, annual leave, no income for part of the leave period, or a mix of these.

A lender then needs to work out whether you can afford the loan:

• during the parental leave period
• after you return to work
• once childcare or schooling costs begin
• if you return part-time instead of full-time
• if your income changes after leave

The problem is rarely parental leave itself. The issue is whether the lender can verify your future income and whether you can manage the income gap before you return to work.

Can lenders use your return-to-work income?

Some lenders may use your return-to-work income, but they usually want clear evidence.

In the policy research reviewed, return-to-work income was often acceptable only when the lender could verify key details.

Common requirements included:

• a confirmed return-to-work date
• confirmation of your employment status after leave
• your salary or wage when you return
• your expected hours of work
• whether you will return full-time or part-time
• evidence that your employer expects you to return
• evidence you can cover any income shortfall during leave

This is why an employer letter is often important.

A lender may be much more comfortable using your future income if the employer confirms exactly when you are returning, what your role will be, how many hours you will work and what income you will receive.

What if you are already on maternity leave?

You can still apply for a home loan while already on maternity leave, but the lender may look more closely at the income gap.

The lender may ask:

• how much income you are receiving now
• when that income ends
• when you return to work
• what income you will receive after returning
• whether you have savings to cover the gap
• whether your expenses will increase after the baby arrives
• whether childcare costs need to be included

Some lenders may accept the application if you are returning to work within a set period. In the policy research reviewed, several lenders had timing conditions such as returning within 12 months, returning within 3 months, or returning shortly after settlement.

The exact rule depends on the lender.

What if you are about to go on parental leave?

If you are currently working but about to start parental leave, the lender may assess both your current and future position.

The lender may want to understand:

• your current income before leave
• your parental leave start date
• how much paid leave you will receive
• how long the paid leave will last
• whether there will be any unpaid leave
• your confirmed return-to-work date
• your income when you return
• your plan for meeting repayments while on leave

This can be a stronger position than applying after income has already dropped, but it still depends on the lender’s policy.

Why savings matter during parental leave

Savings can be important if your income will reduce before you return to work.

Some lenders may want evidence that you can cover:

• home loan repayments
• credit card repayments
• personal loan repayments
• living expenses
• childcare or schooling costs
• other declared commitments
• the income shortfall during unpaid leave

Savings may include money in a bank account. Some lenders may also consider accessible redraw or offset funds, depending on their policy.

This does not mean every borrower on parental leave needs a huge cash buffer. It means the lender needs a clear explanation of how repayments and living costs will be managed while income is temporarily lower.

What documents might lenders ask for?

The exact documents depend on the lender, but parental leave applications commonly require more evidence than a standard PAYG application.

You may need:

• recent payslips
• an employer letter
• evidence of employer-paid parental leave
• evidence of government parental leave pay
• Centrelink or Services Australia letters
• bank statements showing savings
• confirmation of your return-to-work date
• confirmation of your return-to-work salary
• confirmation of your return-to-work hours
• details of childcare costs
• details of any unpaid leave period

The employer letter is often the key document.

What should an employer letter include?

A strong employer letter can make the application easier to assess.

It should ideally confirm:

• your full name
• your employer’s name
• your role
• whether you are permanent full-time or part-time
• your parental leave start date
• your expected return-to-work date
• your income while on leave, if paid by the employer
• your salary or wage when you return
• your expected work hours when you return
• whether your role is ongoing
• the employer’s ABN or ACN, where relevant

Some lenders also require the letter to be recent. In the policy research reviewed, some lender policies referred to employer letters needing to be less than 60 days old, less than two months old, or less than four weeks old.

How different lenders may assess parental leave

Lender policy can vary in several ways:

• Some lenders may use 100% of return-to-work base income if the return is confirmed.
• Some lenders may only use base income, not overtime, bonus or commission.
• Some lenders may require the borrower to return to work within 12 months.
• Some lenders may require the borrower to return within 3 months.
• Some lenders may require evidence of savings for any unpaid period.
• Some lenders may assess the lowest income received during the leave period.
• Some lenders may require childcare costs to be included in living expenses.
• Some lenders may not allow certain loan purposes, such as new or increased lending for investment, under parental leave policy.
• Some lenders may refer the application for credit assessment if parental leave income is needed to pass servicing.

This is why the lender choice matters. The same borrower may fit one lender’s policy and fall outside another lender’s policy.

Can you refinance while on maternity leave?

Yes, refinancing while on maternity leave may be possible.

The lender will still assess your income, expenses, loan purpose and ability to repay. If your income is temporarily reduced, you may need stronger evidence of savings, return-to-work income or ongoing leave payments.

Refinancing may be more difficult if:

• your current parental leave income is much lower than your normal income
• you have a long unpaid leave period
• you are not returning to work soon
• your employer has not confirmed your return-to-work details
• you are returning with reduced hours
• your new loan amount is increasing
• your borrowing capacity is already tight

Refinancing may be easier if:

• you are returning to work soon
• your employer has confirmed your return date and income
• you have enough savings to cover the leave period
• your new repayments are lower
• the refinance improves your financial position
• the loan amount is not increasing significantly

Can you buy an investment property while on parental leave?

This can be harder.

Some lenders may be more cautious with new or increased lending for investment purposes when a borrower is relying on return-to-work income. In the policy research reviewed, some policies specifically restricted or excluded investment-purpose lending in parental leave scenarios.

This does not mean it is impossible. It means the lender selection and loan structure become more important.

If you are on parental leave and buying an investment property, a lender may look closely at:

• your confirmed return-to-work income
• your leave income
• your savings buffer
• the expected rental income
• investment property expenses
• childcare costs
• your existing home loan repayments
• whether the application still passes servicing during and after leave

Can you get approved if you are returning part-time?

Possibly.

If you plan to return part-time, the lender will usually assess the income you are expected to earn after returning, not your previous full-time salary.

For example, if you previously earned $100,000 full-time but will return three days per week, the lender may assess the lower part-time income.

Your employer letter should clearly show:

• your new work arrangement
• your return-to-work hours
• your salary or wage after returning
• whether the part-time arrangement is ongoing

This is important because lenders generally want to avoid using an income figure that will no longer apply.

What if you do not have a confirmed return-to-work date?

This can make approval harder.

A confirmed return-to-work date gives the lender a clear basis for using future income. Without it, the lender may need to rely only on the income currently being received during leave, or may exclude the future income altogether.

Some lender policies reviewed required a confirmed return-to-work date before parental leave or maternity leave income could be used in servicing.

If you do not have a confirmed date yet, you may still have options, but the application may need to be assessed under a different lender policy.

Common mistakes to avoid

• Do not assume every bank treats parental leave the same way.
• Do not apply without a clear return-to-work plan.
• Do not use your old full-time income if you are returning part-time.
• Do not ignore childcare costs.
• Do not forget to include the new baby as a dependant where required.
• Do not rely on verbal confirmation from your employer if the lender needs a written letter.
• Do not assume paid parental leave income will be accepted for the full loan assessment.
• Do not use all your savings for the deposit if you need funds to cover an unpaid leave period.
• Do not assume a bank decline means no lender will consider the application.

How to improve your chances before applying

Before applying for a home loan while on maternity or parental leave, it can help to prepare the application properly.

Useful steps include:

• confirm your return-to-work date with your employer
• ask your employer for a detailed letter
• confirm whether you are returning full-time or part-time
• work out your income during each stage of leave
• identify any unpaid leave period
• keep evidence of savings available
• estimate future childcare costs
• update your living expenses
• check whether your loan purpose fits lender policy
• compare lenders before submitting an application

The goal is to make the lender comfortable with both your temporary leave period and your long-term income position.

Is it better to apply before or after parental leave?

It depends on your situation.

Applying before parental leave may be easier if you are still receiving your normal income and your future leave plan is clear.

Applying during parental leave may still work if your return-to-work income is confirmed and you have enough savings to cover any shortfall.

Applying after returning to work may be simpler if your income has resumed and your new childcare or living expenses are clear.

There is no single best timing for everyone. The right timing depends on your income, deposit, leave period, return-to-work date and lender options.

Example scenarios

Scenario 1: Returning to work in three months

You are currently on parental leave and returning to the same employer in three months.

You have an employer letter confirming your return date, salary and hours.

You have savings to cover the remaining leave period.

This may fit lenders that accept return-to-work income and shorter parental leave timeframes.

Scenario 2: Returning in 12 months

You are on parental leave for a longer period and will return to work within 12 months.

You have a confirmed return-to-work date and enough savings to cover unpaid months.

This may still be possible with some lenders, but policy selection becomes more important.

Scenario 3: Returning part-time

You earned $95,000 before leave but will return three days per week.

The lender may assess the lower part-time income after your return.

Your borrowing power may be lower than expected, even if your previous full-time income was strong.

Scenario 4: No confirmed return date

You are on leave but have not confirmed when you will return.

This can be difficult because the lender may not be able to rely on your future income.

You may need to wait for confirmation or use a lender that can assess the application using current income and savings.

So, can you get a home loan while on maternity leave?

Yes, it may be possible to get a home loan while on maternity leave or parental leave.

The strongest applications usually have:

• a confirmed return-to-work date
• a clear employer letter
• stable employment before leave
• evidence of income during leave
• enough savings to cover any income gap
• realistic childcare and living expenses
• a lender whose policy fits the situation

Parental leave is temporary, but lender policy can be very specific. Getting the right advice before applying can help avoid an unnecessary decline.

Need help applying for a home loan while on parental leave?

A mortgage broker can help you compare lenders that may accept parental leave income, return-to-work income or paid leave income.

We can review your income, leave dates, savings, employer letter and borrowing position before you apply.

If you are planning to buy, refinance or restructure your loan while on maternity or parental leave, speak with a mortgage broker who understands how different lenders assess this situation.