Applying for a home loan with a baby on the way

Having a home loan can be one of the biggest commitments of your life, however having a baby and raising a child will not only be life changing but will also be your largest investment whether you look at things from a financial aspect or the amount of time you will need to input for your child’s upbringing.

As having a baby is life changing in many ways, you might want to look at your options for making a property purchase by talking to a mortgage broker about the options available to you. If you qualify for a home loan you need to consider how you will continue to manage the repayments while parental leave is being taken to spend with the new born? This may mean only the mother will be able to take time off work and the father will have to remain at work as per normal duties to be in a position to cover the minimum monthly loan repayments.

Income and expenses

You will need to factor in the costs of raising a child when working out your total expenses. Each lender will have their own way of calculating the total cost for a family based on the number of adults and dependants and sometimes the location in which you live – if you need some assistance with calculating costs your mortgage broker will be able to assist with this. With raising a child your total expenses will always grow so this may impact the amount of cash funds you will have available to be able to meet the minimum home loan repayments. This in turn can impact the final amount of funds you have the ability to borrow, don’t hesitate to talk to your mortgage broker about the options available to you.

Any lender will need to know and be confident that your total household income will allow you to be able to cover mortgage repayments even while parental leave is being taken. It is without a doubt that if you are the primary caregiver and you plan to take a substantial amount of time off either with partial income being received or no income being received for a set time period this will somewhat impact your household income amount.

When going through the home loan application process with the intention to take some leave from your employment for the reasons of having a baby you will need to provide a letter from your employer stating your employment details and what you will be returning back to and when. Your mortgage broker will be able to advise of what this letter will need to outline to provide to the chosen lender.

Both parents may be eligible for paid parental leave income for a set time period, however you will need to do your own research with your employer to find out who to talk to and what you are eligible to receive as everyone’s situation and entitlements are different. From here you will be able to work out what your income will be and how much leave you will be able to comfortably take.

Finance Commitments

From a finance point of view both having a baby and having a mortgage is seen as a financial commitment, so it is important when looking at taking on both at the same time you are well prepared and know exactly what it is you are in for.

It is handy for you to look over your current financial situation to calculate where you are at, this is as simple as working out your total household income as well as all outgoing expenses and this will give you an indication of what you have the ability to afford. After you have done this, adjust the amounts to reflect what your income and expenses will look like once having your child. If you are unsure don’t hesitate to get talking to your mortgage broker who will be able to look over your situation and provide you with advice. It’s also worth speaking with a financial advisor who can help you with budgeting and understanding the implications of changing expenses at different life stages.

Even though having a child will be an added expense, you may be able to counteract this cost by reducing your current discretionary spending such as reducing the amount of dinner outings and the amount of holidays you go on each year. Depending on the total amount you have the ability to reduce your outgoing expenses by, you might find this may not impact your financial capacity as much as you thought and allow you to still get your foot in the door for a home loan.

After talking to a broker about your options and finding out what a home loan will cost you, you may want to consider your options for either starting a family now or building a nest to bring your family home to. If you engage with the services of a mortgage broker this will work in your favour as they will endeavour to find the most suitable option for your situation and be able to advise on the best way forward. If you have any queries or a question regarding what finance options are available to you, don’t hesitate to talk to your mortgage broker Gerry and he will be able to assist with answering any questions.