October 18, 2017
Are you planning to start a family, or have recently taken Parental Leave and want to know how this affects your mortgage eligibility?
- Australian Prudential Regulation Authority (APRA) are focusing on responsible lending – this means lenders have taken steps to ensure that borrowers retain an adequate financial buffer to allow for unexpected events.
- The introduction of a minimum expected interest rate buffer – the higher of either at least 2 per cent above the loan product rate and a minimum assessment interest rate of at least 7 per cent - means borrowers are finding it harder to achieve adequate net monthly income surplus and qualify for a home loan. In other words, you might be applying for a home loan with an interest rate of 3.79% but your serviceability will be calculated on an interest rate of 7.25%
- To improve your serviceability its simple maths – increase your income and/or decrease your expenses (credit card limits, personal/car loans, HECS).
- Every bank or lending institution has its own policy around income, the reliance on Paid Parental Leave payment and/or your normal salary for meeting the Bank’s minimum servicing requirements.
- Here are some options for borrowers looking to buy a home whilst raising a family:
- ING – While the applicant is on maternity leave, their normal salary can be included in servicing when they are returning to work within the next 3 months* (conditions apply)
- Macquarie – i) 100% of employer parental leave payment and government Paid parental leave payment may be used where evidence is provided of income currently being paid and will continue to be paid until the applicant returns to work* (conditions apply). i) return to work income can also be considered* (conditions apply)
- NAB – i) Pay As You Go (PAYG) income for applicants returning to work within 60 days (full-time or part-time) is considered for servicing ii) PAYG income for customers about to commence, or already on, Parental Leave and will not return to work within 60 days will be considered for servicing if permanent employee with more than 12 months in role and will have primary carer responsibility during parental leave* (conditions apply)
- Westpac – will consider the return to work income for applicants who are currently on parental leave or about to go on parental leave at the time of the application. Lender will also consider interest only repayments for a max period of 12 months (until the return to work date) for owner occupied loans* (conditions apply)
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