HOME LOANS ON MATERNITY LEAVE
Personal loan + small deposit + on maternity leave.
Can Melanie still borrow?
Melanie is a 1st time mother of a three month old. She has taken maternity leave on full pay until February, where she will then receive the Centrelink payment for a further 8 weeks on around $1,300 a fortnight. Melanie will then return to work full time on full pay ($91K). Melanie’s husband Tom is working full time as a mechanic earning $103K. Their jobs are secure and they plan to spend $650K on a home.
Problem: They only have $19,000 saved. Credit card debt of $27K. Personal debt of $22K. They will lose a full time income for 2 months early next year.
Can Melanie & Tom buy a home?
There are lenders who will consider a 3% deposit, however, it is best to aim for 5% Melanie & Tom are less than 3%. It will trigger a greater LMI cost and be unacceptable to most lenders.
Remember: Melanie & Tom have $49K in credit card and personal loan debt. This is a problem when considered alongside of a 2.9% deposit & Melanie on maternity leave.
They are eligible for the FHB grant as they are buying a new house and land package.
What does this mean?
Melanie and Tom have less than minimum deposit & will lose an income for 2 months. This is Melanie’s first child, so lenders will certainly have questions and concerns around arrangements for the child when she returns to full time work. And finally, with debts outweighing their deposit, now is NOT the time to move from renting to home ownership.
Forward Guidance
It is best for Melanie to continue paying down their debt. They are good little savers and will easily have 5% deposit early next year. This will reduce their LMI and get rid of some of that crippling personal debt. Once Melanie returns to full time work, then it will be time to come back to learn her new options.
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