Thinking about having a family, but you want to buy a house first? Then you really should look at getting the right home loan in the first place.
Some lenders will allow you to take a ‘pregnant pause’ while you are off on maternity leave. This does take some planning and you should understand the consequences beforehand as conditions will vary from lender to lender.
You may wish to consider the following suggestions aimed at helping you set up and manage your mortgage repayments if you plan on taking maternity leave:
Get a variable rate home loan – A variable rate home loan provides more flexibility compared to a fixed rate home loan. If you’re planning to take time off you’re going to need a flexible home loan so mention this to your mortgage broker so they can research appropriate home loans.
Get ahead in your repayments – Plan to be ahead in your repayments as far as you can before you go on maternity leave so when you take time out of your paid employment, your mortgage repayments can be taken out of the buffer you’ve built up. Alternatively, you can put aside a regular amount in a savings account and use it to pay the mortgage while you’re off work.
Consider getting an ‘interest only’ loan – This may give you the flexibility of making principal and interest repayments before you go on maternity leave. And also allow you to make more manageable interest only payments whilst you’re not working.
Choosing an ‘interest only’ option may in some circumstances reduce your repayments by a couple of hundred dollars a month, making your mortgage easier to afford during the time you’re on maternity leave.
To calculate the difference in your mortgage repayments on a ‘principal and interest’ loan vs an ‘interest only loan, try our home loan repayment calculator.
Example: If you have a loan balance of $300,000 paid over 30 years and an interest rate of 5%; your ‘principal and interest’ mortgage repayment would be $1610.46 per month; whereas the ‘interest only’ mortgage repayment would be $1250.00 per month.
Keep your lender in the loop – A phone call to your lender may enable you to reduce your repayments or stop them entirely whilst you’re on maternity leave – although this is always at the discretion of the lender. Keep in mind however that the disadvantage of doing this is that you would have to “catch up” later down the track, making repayments when you return to work higher until you are up to date.
What if you already have a mortgage and want to have a baby?
If you already have a home loan and are thinking of starting a family or growing the one you have, then it could be time for a home loan health check.
Taking the time to have a good look at your current mortgage will give you the opportunity to see if the home loan you have now will answer your needs when the baby arrives later.
- Speak with your lender to see what features they may offer like a ‘pregnant pause’
- Get in touch with a mortgage broker to explore whether there’s a product designed with features in mind for people who are planning to have a baby
- Use free online calculators to get an idea of the difference between ‘principal and interest’ and ‘interest only’ repayments
Whatever option you ultimately decide upon as being right for you it’s important to remember that planning is definitely key, just as it is when starting a family!
Have you got a tip for managing a mortgage and a baby? Share your thoughts in the comments below.
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