Selina and Daniel were looking forward to having their second child, and also had the goal of adding to their property portfolio. However, trying to get an investment loan while on parental leave can create unexpected barriers at a time when a stress-free environment is vital to any expectant parent.
The good news is that there are some lenders who take a progressive view towards income assessment while prospective borrowers are on parental leave. Moreover, the lending specialists we work with at The Property Mentors are dedicated to knowing and understanding each lender’s policies in this particular area.
Selina was to be on parental leave for at least six months. Her payment schedule during her leave was as follows:
- A month and half of full-time pay
- Remainder at half pay
- Two weeks at no pay
- Return to work hours/days reduced
Both Selina and Daniel planned for (and hoped) that settlement would occur before their baby was due.
They had more than enough funds ready to go sitting in a savings account. The only thing they needed was a valid loan approval as their previous applications were based on them both working full-time. Their most recent payslips would, of course, show that there was a change in their circumstances, and they were concerned that they would not achieve a favourable outcome because of the reduction in Selina’s income.
Our first step was to do serviceability calculations for the proposed loan. We needed to take into account Selina’s new income schedule based on her parental leave, as well as her reduced return to work hours.
As we knew that Selina was returning to work in about six months' time, we needed to show that there was a cash buffer available to them to cover the reduced income. This buffer amount would be held in a separate account to the deposit funds ensuring they had ample cash available until Selina's regular income resumed.
Our next step was to find a suitable lender that would be favourable to their situation. Once we did that, we liaised with that lender’s Business Development Manager and gauged some insight as to how that particular lender preferred the application to be prepared.
We provided documentation and notes that showed that after the purchase there would be an excess in savings to cover costs during maternity leave. We further showed that although Selina’s return to work schedule is reduced from her regular working hours, she still earned enough income (combined with her husband’s salary) to meet repayments. We made sure to factor in long-term expenses and commitments into our calculations, including the increased costs of living expenses associated with having a second child, as well as all other expenses involved with a property purchase.
We also provided a letter from Selina’s employer clearly stating the date she would be returning to work, her income during maternity leave and her continuing salary.
Success…Unconditional approval, not to mention a brand new baby!
The client’s loan process went through smoothly, and with The Property Mentors negotiating on their behalf, they took advantage of the ‘buyers property market’ and purchased their new investment property in a major Australian capital city - with free inclusions from the vendor and at a significant discount.
Rather than losing valuable time in the market Selina and Daniel expanded their investment portfolio and are building a brighter future for their growing family.
Want to discover how our team can help you realise your investing goals? Book in a call with The Property Mentors today.
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