Your financial situation will likely change significantly due to the addition of a new family member. Indeed, one of the most frequently cited reasons people purchase a new home is to accommodate their growing family. It's easy to overlook some of the most critical factors to consider when purchasing a home with a new baby on the way during this challenging and frequently stressful time.
Consider the following when applying for a home loan while expecting a child:
1. The Cost of Raising a Child
Having a child will increase your ongoing expenses regardless of your income level. Thankfully, it’s easier to prepare for these outflows if you know how much they amount to.
There are numerous additional costs associated with raising a child, from buying clothing to different kinds of baby food. You will no longer be spending solely for yourself but the new family member as well. These extra child care costs must be budgeted for. This means you'll have less money available to make home loan repayments, limiting the amount you can borrow.
Your lender will use different calculations based on your current financial situation to determine your ability to repay your mortgage. This may necessitate adjusting your expectations and obtaining a smaller loan amount.
2. Changes in Your Earnings
Financial security is your goal, or at least what your lender should expect from you. Since you may take time off to be a new parent, a lender should still feel secure about your ability to pay your mortgage payments.
If you are the family's breadwinner and intend to leave your job, whether temporarily or permanently, the financial impact on your family will be significant. When applying for a loan and planning to take a job break, a letter from your employer confirming your return-to-work income may be required.
Parental leave may be available to both parents. Parental leave pay is frequently less than your regular salary. Calculate your new income by determining how much parental leave you intend to take. Consult your employer to decide whether or not they provide any additional benefits.
Naturally, a "bonus" could decrease another discretionary spending. You're likely to spend less time out, and expensive vacations are unlikely to return shortly.
3. Your Financial Obligations
While raising a child will add to your costs, you may find that you can cut back on discretionary expenses such as dinners, vacations, and other luxuries. Evaluate your current financial situation by compiling data on your income and expenses, including any outstanding loans. Determine what repayments you have to shoulder and adjust the amounts to reflect your post-baby income and expenses.
Depending on how much you can reduce your financial capacity, this may even provide you with the same financial ability. Alternatively, you may still be able to service a mortgage but may not be able to borrow as much as you initially believed.
When these life-changing events occur concurrently, your excitement to welcome a new family member may be burdened by your anxieties and stress. While purchasing a home while pregnant or on maternity leave can be challenging, it does not have to be. Our guide should assist you in navigating the home loan application process while pregnant or following the birth of a child. With the right approach and the ideal mortgage, you can face anything.
Check out great deals at Wealthy You if you're a parent expecting a baby on the way and a first-time home buyer in Sydney. With over a decade of experience, we guarantee a wide range of mortgage solutions to meet your specific needs with less hassle on the loan processes.