Do you have to tell your mortgage provider if you change jobs or get pregnant?
Since changing your job or falling pregnant can have an effect on your finances, you may be earning or less in your new job and obviously, having a child is another outgoing expense.
Therefore, is it protocol to let your mortgage provider know about either of these life changing events?
According to a recent survey created by uSwitch, one in ten women between the ages of 25-45 said that they felt as though they had been discriminated against by lenders once they had expressed their desire to start a family.
Affordability rules which came in 2015 mean that some firms are now required to ask questions about changes in income.
If you fall pregnant
Women have advised to be made aware of the pregnancy pitfalls when applying for a mortgage or are currently paying a mortgage. Due to the change in rules, new parents who are applying for a mortgage from some of the largest lenders are being asked to prove that they will be returning to work after their maternity and/or paternity leave before they can be included in their usual affordability checks.
If the couple or individual is not going to be returning to work within three months, their “return to work” income may not be included in the overall checks. As a consequence, the price of the mortgage may be calculated based on their pay during the period of maternity or paternity leave.
Lenders such as Barclays, RBS and NatWest base their decision on the salaries on the applicants will be receiving after they have returned to work rather than the pay they will receive whilst they are on leave, which seems far more logical.
What can lenders ask about pregnancy?
Lenders are prohibited from asking you whether you are currently pregnant, planning a pregnancy or on maternity leave when you apply for a mortgage. This question would go against the Equality Act 2010 as plain discrimination.
Nevertheless, tighter lending rules mean that they are lawfully required, not just entitled, to take into account any future changes to your incomings – this then works for if you are just changing jobs as well. Of course, having a baby can have an impact on both parties so this should be taken into account by the lender.
They will ask if you are aware of any changes to your income in the near future and if you answer yes because of a pregnancy, the underwriter will look at whether you are able to afford the mortgage as though you already have an additional dependent. This basically means they will factor in any child care expenses.
You can also expect to be asked about your salary on your return to work, the length of your maternity or paternity leave and if you are planning to return to work full-time or part-time.
If you are changing jobs
It is the same premise as if you were to fall pregnant, lenders are now required to take into account any income changes. This could work in your favour if you are getting a larger salary as this will mean you may be able to snap up a better deal on your mortgage if you can afford to pay more off each month. So if you change jobs with a mortgage in place, it is vital as well wise to let your lender know and inquire whether a better deal is available to you if your income has been increased.
According to the Council for Mortgage Lenders, the information about your change in financial situation is gathered to “try to reduce the risk of borrowers taking on debt commitments that could become unaffordable.” Therefore, lenders will ask if you are aware of any changes to your income in the foreseeable future (whether this is due to a new arrival or change in job).
Consider a Bridging Loan?
If you are in need of cash to buy a house urgently but do not have time to wait for a mortgage to clear, an option for you might be a bridging loan. A bridging loan is a type of short-term finance which essentially ‘bridges the gap’ between you and the mortgage, allowing you obtain the property without a mortgage being cleared. Rather than losing a potential property, you can apply for a bridging loan and receive the money in one lump within a few working days. Once the property has been purchased and has access to more finance, you will be required to repay the loan.