Home loans on parental leave
Parental leave creates a specific problem for lenders: your income right now is lower than the income you will be earning when most of the loan is repaid. Some lenders assess you on the reduced figure, some on your return-to-work salary with the right evidence, and the gap between those two approaches decides whether the purchase happens now or in a year.
How lenders approach it
The more accommodating policies assess you on the income you will return to, rather than the income you are currently receiving, where you can evidence that the return is real and defined. What they generally want is a letter from your employer confirming your return date, the position, the hours and the salary on return. Where that evidence exists, a household on reduced income today can often be assessed close to its normal position. Where it does not, the assessment falls back on what is actually being received, which is a materially different number.
What the employer letter needs to cover
Confirmation that you are on approved parental leave, the date you are returning, whether you are returning full-time or part-time, the hours, and the salary or rate on return. A letter that says you are 'expected back at some point' does not do the job. A letter that states the date, the role and the pay does. This single document is frequently the difference between two very different borrowing figures, and it costs nothing but a request to HR.
Returning part-time
If you are returning at reduced hours, that reduced figure is generally what a lender will use, because it is your actual ongoing income. It is honest and it is also worth planning around: a household budgeting on a full-time return that does not eventuate is exposed. Where part-time is the plan, the assessment should reflect it from the start rather than being corrected later.
Government parental leave payments
Treatment varies. Some lenders will count government parental leave payments, some will not, and where it is counted the treatment is usually conservative because the payments are time-limited by design. Employer-paid parental leave is a different question again and depends on the arrangement. Neither should be assumed either way without checking the specific lender's written position.
What tends to decide a parental leave application
Four factors, and the first one carries most of the weight.
Date, role, hours and salary on return, in writing from your employer. The single most valuable document on the file.
A reduced-hours return is assessed on the reduced income, which is honest and worth planning for rather than discovering.
On a joint application, a stable second income does considerable work while one is temporarily reduced.
Credit limits and small debts weigh more heavily while income is temporarily lower. What actually helps.
On leave and worried the timing is wrong?
Charles can tell you what your file supports now, and whether waiting for the return actually changes it.
Parental leave and home loan questions
Can I get a home loan while on parental leave?
Frequently yes, and the deciding factor is usually evidence rather than eligibility. Lenders whose policy accommodates parental leave will assess you on your return-to-work income where you can produce an employer letter confirming the date, role, hours and salary. Without that letter, the assessment tends to fall back on the reduced income you are currently receiving.
What exactly should the employer letter say?
That you are on approved parental leave, the date you return, whether the return is full-time or part-time, the hours, and the salary or rate on return. Specific and dated. A vague letter is worse than useful because it invites questions rather than answering them.
Will government parental leave payments count as income?
It varies by lender, and where counted the treatment is usually conservative because the payments are time-limited. Employer-paid schemes are assessed differently again. Neither should be assumed; it is a question to settle before an application rather than during one.
Should I just wait until I am back at work?
Sometimes, and sometimes not. If the return is documented and a suitable lender exists, waiting may cost you a year of the market for no gain. If the return is uncertain or part-time and the file is tight, waiting may genuinely be the better call. It is worth having the numbers on both before deciding.
Does refinancing work differently while on leave?
The same income questions apply, but the bar is often lower because you are not increasing the debt. A straight rate-driven refinance with no additional borrowing is a more modest ask than a purchase, though it is still a fresh assessment rather than an automatic switch.
Related guides
General information only, not credit or financial advice. Professional lending policies, eligible occupations and loan-to-value thresholds vary by lender and change over time. Eligibility is confirmed against current lender policy in an assessment; nothing on this page is a promise that any lender will approve any application.
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