Welcome to Say What Wednesdays, where every week we answer questions from you guys, the listeners.

This week the question comes from Mary;

“Hey guys, love the show. Just wondering about what entitlements, I can receive if I go on maternity leave? I’m currently pregnant and me and my husband are looking to purchase our home soon. We were wondering if there was anything we need to watch out for when it comes to getting a loan while on maternity leave? Are there any other things we should be looking out for?”

Congratulations Mary!

The Ultimate Guide to Maternity Leave

Maternity Leave Letter

• Need to give your employer written confirmation that you intend to take some personal time off to have your baby.
• At least 10 weeks before your due date, and in a lot of cases happens much earlier
• Must confirm your parental leave dates at least 4 weeks before taking your leave.
• A Maternity Leave Letter in Australia needs to 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 – can include a medical certificate confirming your pregnancy
  • An email copy of the Maternity Leave Letter to your Manager or HR team should be acceptable.
• Template available on the website

Paid Parental Leave Scheme

• Entitled to 18 weeks paid leave for eligible working mums (primary carers). Dads/partners (including same-sex partners) get 2 weeks paternity paid at the national minimum wage.
• Employer is required to provide 12 months of unpaid leave, providing you are.
  • Permanent employee who has worked for at least 12 months before taking parental leave
• What are the criteria for Paid Parental Leave?
  • 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
  • The Paid Parental Leave scheme covers casual workers, contractors and self-employed
• How much do I receive from Paid Parental Leave?
  • 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

• 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
  • Under the terms of a maternity leave home loan you can borrow up to 80 per cent of the property price
  • Unpaid maternity leave – you’ll need to have some money set aside to be used for making repayments.
• Applying for a Home Loan during Pregnancy
  • Best to apply for a home loan when you are pregnant and are still working.
  • Can be a lot harder for you to secure a home loan whilst on maternity leave.
  • Sit down and create a clear financial plan before the baby arrives so that you’re prepared
  • Remember that you’ll need a bit of extra money to move and for the unexpected expenses
  • Which banks will offer Maternity Leave home loans?
    • Majority of the banks reject this type of loan application
    • Why? Because they consider it risky – based on the idea that you may be able to not return to your job while lending policies for this type of home loan are stricter a number of banks still loans
• While lending policies for this type of home loan are stricter a number of banks still loans – Just need:
  • Evidence of income or employment – group certificate, or PAYG summary showing your previous years income.
  • A letter from your employer, states that you are on maternity leave along with all the details
  • 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

Unpaid or Paid Maternity Leave: Does it make a difference?

1. Compared to unpaid maternity leave, a paid maternity leave is viewed positively by banks – obviously
2. But most employers only pay half of your salary on maternity leave so lenders don’t evaluate it based on a normal salary.

Is it possible to put my mortgage payments on hold?

• If you’re a bit further down the track than 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.
• One option is 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.
• Options for Repayment Holidays?
  • Equity in your home is release to help you with a portion of repayments
    • Up to 50% reduction in personal repayments for 12 months
  • Some banks will allow you to increase your loan to cover the additional costs while you are off work
    • In this case, you cannot pause the payments but it is another option…
  • While this could be a good option if you feel financially squeezed while on Parental Leave, you are just delaying making the payments until when you return back to work, so some caution needs to be exercised.

Summary – Options regarding mortgages and maternity leave:

1. If you have an existing property (and meet certain criteria) taking a repayment holiday using your equity if you already have a home loan is an option
2. New loan – Speaking to the right lender to take out a loan during maternity leave
3. New loan – Taking out a loan during pregnancy which will make it easier.

Jayden loves to talk about this stuff… here’s where he discusses maternity leave and borrowing on the Hunter Galloway website. The Maternity Leave Letter Template can be found there too (or download the same thing here)

Thanks again for your question, Mary! If any other listeners have any questions or topics for discussion, head to www.financeandfury.com.au and head to the contact page.