How Different Lenders Will Use Maternity Leave in a Mortgage Application

Leduc mortgage broker Dennis Ward of Advantage Mortgage breaks down the important information you need when applying for a mortgage on maternity leave.

Pregnant mothers have a lot to think about. Certainly, you would love to be able to bring your babies back to a brand new home. You might be taking maternity leave to prepare for the birth. How is mortgage approval on maternity leave treated?

When is the best time to apply for a mortgage in Alberta? Do all mortgage brokers treat maternity leave the same? We will answer these important questions for maternity leave mortgage applications in Alberta.

Can My Mortgage be Approved on Maternity Leave?

Naturally, parents want to bring babies to their new family home.  But, some mothers might wonder if their mortgage can still be approved while they are on maternity leave.  Some families may also wonder if their mortgage qualification budget can include their Canadian Child Benefits (CCB). While family leave is a great benefit, a mother’s income is still reduced. Will families be penalized on their mortgage application for having a reduced household income?

If a mortgage lender would average this period’s income, a loan might not be approved. Even if the home financing is approved, the qualifying amount might be smaller.

How we helped a family get approved for a mortgage on maternity leave

Mortgage broker Dennis Ward of Advantage Mortgage explains how he helped a client on maternity leave get approved for a mortgage in August 2018.  Dennis explains the reasons why the client was rejected by their bank, and how he was able to overcome the challenges and find a solution by harnessing the power of multiple lenders!

How do different lenders treat maternity leave?  Let’s dive in and find out.

Room to Grow

Of course, homeownership provides your family with more room to grow. Depending on the size of your family, an apartment can be quite confining. Parents want a larger family home with plenty of space for their growing family.

Advantage Mortgage works with multiple mortgage lenders

Mortgage approval on maternity leave is a concern best addressed by having access to multiple lenders. You can ask them point blank – “How will you treat maternity leave on a mortgage application?” Find the Leduc mortgage broker that gives you the most acceptable answer.

Increased Chances of Approval
Your chances of being approved for a mortgage are far better with access to multiple lenders. Some might calculate a dramatically reduced household income; others might not.

Larger Total Qualification Budget
When you apply for a mortgage in Alberta, maternity leave could reduce your “Total Qualification Budget.” The best mortgage brokers for mothers will give you the most credit for your income before you took your leave of absence.

Alberta Laws on Family Leave

Canadian mothers have the human right and employment benefit of taking time off from work for the birth of their baby. This is a national right involving two primary factors: Leave and Benefits. The structure of maternity leave involves four primary entities: the national government, the Province of Alberta, your employer and you.

“Leave” refers to your ability to take time off. “Benefits” refers to the Employment Insurance (EI) money that you receive while you are away from your job. The national government enforces the law and pays out your EI through Service Canada.

Each province sets its own rules. In its brochure entitled, “Becoming a Parent in Alberta,” the government lays out its guidelines and laws for maternity leave and family leave.

The Alberta government breaks down the parental leave benefits into three time periods:

  • Working while pregnant
  • Time off from work
  • Returning to work

1.) Working While Pregnant
Morning sickness, back pain and fatigue are just some of the usual consequences of pregnancy. You are eating for two, and your body is cleansing out your system to create a safe environment. Concentrating on your job can be difficult.

Simply put, you won’t be as productive at work, while pregnant. At a certain point, it is wise to take time off and rest for the sake of your baby’s health and yours. Under the law, you have the “right to decide” when you will begin your leave for health reasons.

Q: Who qualifies for maternity leave?
A: You must have accrued 52 consecutive weeks of working with the same employer to qualify for maternity leave benefits.

In order to take maternity leave, you should provide your employer with a medical certificate or doctor’s note. It should include your next health appointment, expected birth date and expected return date. If your situation changes, you must notify your employer of the changes.

2.) Time Away From Work
The employer is responsible for providing you with the ability to leave and return to the same position at the same wage rate. If other employees are allowed to use sick leave, accrued time off, vacation time or overtime benefits for their time off, then mothers are allowed to do the same, according to Alberta law.

Q: How much maternity leave time are Alberta mothers entitled to?
A: The Alberta “Employment Standards Code” provides mothers with up to 15 weeks of job-protected leave time for prenatal, birth and post-natal recovery.

Q: When can I begin my maternity leave?
A: Mothers can begin their “maternity leave at any time within 12 weeks before your estimated due date.”

Q: How much written notice must I give?
A: You must give your employer at least 6 weeks’ notice before you intend to leave. Your employer may request a medical certificate, confirming your pregnancy and expected date of birth.

Once you leave work, you should immediately apply for EI maternity leave benefits from the local branch of Service Canada. You should include Record of Employment (ROE), Social Insurance Number (SIN), personal ID and bank account information. The statute of limitations on applying for maternity leave EI benefits is four weeks.

Q: When do I get my first EI payment?
A: There is a two-week waiting period.

Q: How much do I get?
A: In all depends, but it might average about 40% to 55% of your average insured earnings. Some employers provide top-ups or extra money.

3.) Returning to Work
Take time to relax during your maternity leave – focus on being healthy and enjoying your family. Your job is secure for when you are healthy enough to return.

Q: How soon must I notify my employer of my intention to return to work?
A: You are required to give your employer at least four weeks’ notice of your intention to return.

If you have any more questions about the Alberta laws, you can call the Alberta Employment and Immigration (AEI) at 780-427-3731.

Maternity Leave Return Letter

You must prove your income on the mortgage application. Salaried employees must provide their T4 statement from the prior year to the maternity leave. You must also provide a Letter of Employment stating your employer, job, position, start date, return date and salary.

Include your maternity leave return letter, listing your benefits. Here is a sample range of how different lenders might treat a mother’s income:

  • Current Employment Insurance Only
  • 60 Day Return Letter
  • 100% with 3-4 Month Return Letter
  • 100% with 6 Month Return Letter
  • 100% with Return Letter
  • 100% with 1 Year Return Letter

As you can see, maternity leave loan treatment varies dramatically. Basically, different lenders weigh the mother’s income from a low of Employment Insurance to a high of 100% of her salary.

As a new mother, should you wait?

photo of an expecting mother in Leduc alberta planning for her upcoming maternity leaveWe don’t give any mortgage advice; we only provide you with facts so that you can decide. Your mortgage is a snapshot of time. If that snapshot is when only the husband has a full income, then it might not be the most accurate.

Should the parents wait until both are working to get the maximum “Total Qualification Budget?”

Here are the primary options:

  • Apply early and bring baby home to a small house
  • Apply later to qualify for a larger house.

1.) Small Home Now
If you apply before birth, you can focus on decorating the home. Your income is lower, so chances are that you can only afford a smaller house. You can bring baby home directly from the hospital.

2.) Large Home Later
If you wait, your full income is used to qualify for a larger house. Unfortunately, the baby might need to start in your present residence while you prepare your mortgage application. When ready, you can move to your larger family home.

Of course, both of these scenarios assume you will still qualify with a lower income.

Advantage Mortgage: Baby On Board

Being a parent includes many responsibilities. You must not only plan for your own success but those of your children. If you want a new house now, are you willing to accept a smaller home?

Your priorities will determine when is the best time for you to apply for a mortgage in Alberta. Your maternity leave is a great benefit, but might lower your overall “Total Qualification Budget.” You could wait and perhaps, you could afford a larger home.  It depends on several factors, all of which the mortgage brokers at Advantage Mortgage can help explain for you.  All it takes to find out is a quick phone call to our office at (780) 991-1600 or online.

Review the offers made by your Leduc mortgage brokers, Advantage Mortgage. There is a great deal of variance for maternity leave income qualification.

Once, you are approved for a mortgage, remember blue is for boys and pink is for girls.