Remortgage on Maternity Pay

Understanding Maternity Pay and Mortgage Affordability

Maternity pay in the UK typically follows a declining pattern. Most employees receive six weeks at 90% of their average weekly earnings, followed by up to 33 weeks of statutory maternity pay (SMP), and then any remaining weeks are unpaid. Some employers offer enhanced maternity packages that are more generous than the statutory minimum.

From a mortgage lender's perspective, the challenge is that your income during maternity leave does not reflect your normal earning capacity. Statutory maternity pay can be significantly lower than your usual salary, which affects the affordability calculations lenders use to determine how much you can borrow.

The critical question is whether the lender assesses you on your maternity pay or on your return-to-work salary. This single distinction can make a difference of tens of thousands of pounds in the amount you are able to borrow.

For example, if your normal salary is £40,000 but you are currently receiving statutory maternity pay of around £184 per week (approximately £9,500 per year), the difference in borrowing capacity is substantial. A lender using your maternity pay figure might offer you far less than one using your full salary.

This is why choosing the right lender — and the right adviser — is so important when remortgaging on maternity pay.

Which Lenders Are Most Flexible?

Lender attitudes to maternity pay vary significantly across the market. While we cannot recommend specific products, understanding the general approaches can help you know what to expect.

Most flexible lenders: Several major high street lenders and building societies will assess your application based on your contracted return-to-work salary, provided you can supply a letter from your employer confirming your return date and salary. These lenders recognise that maternity leave is a temporary situation and that your true earning capacity is best reflected by your substantive salary.

Moderately flexible lenders: Some lenders will average your maternity pay with your return-to-work salary, or will use your return salary but only if your return date is within a certain number of months.

Less flexible lenders: A smaller number of lenders will only consider your current income at the time of application. If you happen to approach one of these lenders first, it can be disheartening — but it does not mean that all lenders will take the same view.

A whole-of-market mortgage adviser has access to detailed information about how each lender handles maternity pay applications. They can steer you towards the most suitable lenders without wasting time and credit checks on those who are unlikely to help.

This specialist knowledge is particularly valuable because lender policies change frequently, and what was true six months ago may not be the case today.

Enhanced Maternity Pay and Its Impact

If your employer offers an enhanced maternity package — paying above the statutory minimum — this can work in your favour when applying for a remortgage.

Enhanced maternity pay demonstrates that you have a secure position with a supportive employer, which lenders view positively. The higher income figure also improves your affordability calculation, even with lenders who assess based on your current pay.

Common enhanced maternity packages include:

• Full pay for a set number of weeks (sometimes 12, 16 or even 26 weeks)
• A percentage of salary (such as 75% or 80%) for an extended period
• A combination of full pay and partial pay periods

When applying, make sure your payslips and employer letter clearly detail your enhanced maternity pay structure. If your current payslips show enhanced pay that is close to your normal salary, this makes the affordability assessment much more straightforward.

Even with enhanced pay, your best option is usually to work with an adviser who can identify lenders that will use your return-to-work salary. However, having enhanced pay as a safety net means more lenders are likely to view your application positively, regardless of their income assessment methodology.

Product Transfers: A Simpler Alternative

If remortgaging to a new lender feels complicated while on maternity pay, a product transfer with your existing lender could be a simpler alternative worth considering.

A product transfer means switching to a new deal with your current lender rather than moving to a different one. The key advantage is that many lenders do not carry out a full affordability assessment for product transfers, particularly if you are not borrowing any additional money.

This means your maternity pay situation may not be scrutinised in the same way as it would for a new mortgage application. Your existing lender already has a relationship with you, knows your payment history, and may simply offer you their available rates without reassessing your income.

The potential downside is that your current lender's product transfer rates may not be the most competitive on the market. You could be paying more in interest than you would with a different lender who offers lower rates.

It is worth comparing both options:

• Get a product transfer quote from your existing lender
• Ask a mortgage adviser what rates are available from other lenders, taking your maternity pay into account
• Compare the total cost over the deal period, including any fees

Sometimes the convenience of a product transfer outweighs a slightly better rate elsewhere, particularly during a busy time like maternity leave. Other times, the savings from switching lender are significant enough to justify the extra effort.

Joint Applications and Partner Income

If you are remortgaging jointly with a partner, their income plays an important role in the affordability assessment and can significantly strengthen your application.

For joint applications, lenders typically combine both incomes when calculating how much you can borrow. If your partner has a stable, full-time income, this can offset the impact of your reduced maternity pay. In many cases, the combined assessment means your maternity status has little practical effect on the outcome.

Some points to consider with joint applications:

• Both credit histories matter — the lender will check both applicants' credit records
• Combined debt is assessed — all financial commitments from both partners are taken into account
• Income evidence for both — you will both need to provide payslips, bank statements and other documentation
• Both must pass the affordability stress test — lenders check that you can afford payments if rates increase

If your partner's income alone is sufficient to support the mortgage, some lenders may place less emphasis on your maternity pay. In some cases, it might even be worth exploring whether the mortgage could temporarily be assessed on one income, though this would depend on your specific circumstances and the lender's criteria.

An adviser can model different scenarios for you and work out the best approach for your joint application.

Preparing Your Application

Good preparation can make the difference between a smooth remortgage and a frustrating one. Here is a practical checklist for remortgaging while on maternity pay.

Documents to gather:

• Your employment contract showing your substantive salary and terms
• Recent payslips (even if they show maternity pay)
• A letter from your employer confirming your return date, hours and salary
• Bank statements for the last three to six months
• Details of any debts, loans or credit commitments
• Your current mortgage statement
• Proof of identity and address

Actions to take:

• Check your credit report and address any errors before applying
• Work out how much you can comfortably afford in monthly repayments
• Find out when your current mortgage deal ends and what rate you will revert to
• Check whether your current deal has early repayment charges
• Speak with a mortgage adviser who has experience with maternity leave applications

Things to avoid:

• Do not apply to multiple lenders yourself, as each application may leave a footprint on your credit file
• Do not overstate your income or misrepresent your return-to-work plans
• Do not ignore your current mortgage deal expiry — defaulting to SVR can cost hundreds of pounds per month

With the right preparation and professional guidance, remortgaging on maternity pay does not need to be stressful. Many thousands of parents go through this process successfully every year.