Children, while being a blessing in their own right, are a financial burden. There is no denying that a new child is an expensive endeavour both in the direct costs, and the loss of income that comes with a year or more of maternity leave. While these costs will regularly send new mothers back to work early in order to support their family, it is often possible for new parents to borrow in a way that allows them to stay on leave from work.
Because of the way in which taking the time and energy into family can easily be seen as an invaluable investment, borrowing to support that investment is often a justifiable endeavour. However, because of the way in which new parents often have reduced income, we need to know what kind of rules we’ll be working with, so as to not compromise our ability to borrow. Specifically, we need to know how to support our application-based income during a maternity leave.
There are two easy ways for a borrower on maternity leave to support their income on a loan application. The first one is by far the simplest method, because it simply involves understanding and properly communicating the terms of your maternity leave.
In most cases, banks are willing to accept previous incomes from an employer that has allowed maternity leave so long as the borrower was employed there for at least two years, and has guaranteed employment in the event that they should wish to return to their previous position.
The second way to support income while on maternity leave is to apply for a spousal loan. By adding the support of a spouse onto a loan application, a borrower on maternity leave is able to support the missing income-aspect of the application through the incomes of their household as a whole, while still supporting the application with their own credit score and net worth.
While very similar to simply having a co-singer on a loan, a spousal loan differs in the way in which the lender will view the application itself. Specifically, lenders seeing a spousal application will generally see the household as being more stable, and therefore in a more stable light.
While the terms of all these solutions are fairly self-explanatory, it is still important to remember that, no matter what kind of debt is eventually procured, the minimum monthly payments must still be paid. Because of this requirement, many maternity borrowers choose to borrow through a line of credit, as opposed to a straight loan, because of the way in which it allows them to make interest-only payments in most cases, and then they can pay off the balance once they return to work and have an income.
