Maternity Leave and Borrowing Capacity Using Spousal Income

When one partner is on maternity leave, structuring a loan can become more nuanced, especially if you are trying to maximise borrowing capacity using both incomes. A common question we see is whether income can still be used to support an application when one partner is temporarily out of the workforce.

The short answer is yes, but it depends on how the deal is structured and how different lenders assess income during this period.

What Is Spousal Income Offset

Spousal income offset refers to structuring a loan in one partner’s name while still using the other partner’s income to support the application. This can be particularly useful when one applicant has a stronger financial position or cleaner credit profile.

From a credit perspective, the goal is to show that household income remains stable, even if one partner is temporarily earning less or not working.

How Maternity Leave Impacts Loan Applications

Maternity leave changes how income is assessed. Even if the leave is paid, many lenders take a conservative view because the income is considered temporary or reduced.

Key considerations include:

• Whether the maternity leave is paid or unpaid
• The expected return to work date
• The role and income level post return
• The overall household financial position

In most cases, if a partner is on maternity leave, their income is either shaded down or excluded entirely. This can impact borrowing power more than most people expect.

When Paid Maternity Leave Can Still Be Used

There are scenarios where paid maternity leave income can still be considered to support a loan, even if the application is primarily in the other partner’s name.

This typically comes down to:

• Clear evidence of ongoing employment
• A confirmed return to work date
• Consistency in industry and role
• Strong overall financial position

The closer the return to work date, the more comfortable lenders tend to be. Timing becomes a key factor in how the deal is positioned.

Structuring the Application the Right Way

This is where strategy matters. Simply submitting an application without positioning the maternity leave correctly can lead to a decline or reduced borrowing capacity.

A well-structured application will:

• Clearly outline the return to work plan
• Provide supporting documents from the employer
• Demonstrate how expenses are being managed during leave
• Show that the loan remains serviceable both now and post return

In some cases, it may make sense to proceed with one applicant only. In others, including both applicants with the right narrative can improve the outcome.

Common Mistakes to Avoid

We often see clients run into issues because the application has not been structured correctly from the start.

Some common pitfalls include:

• Assuming paid leave will automatically be accepted as income
• Not providing evidence of return to work
• Applying with the wrong lender for the scenario
• Overestimating borrowing capacity based on pre-leave income

Getting this wrong can lead to unnecessary credit enquiries and delays in securing approval.

Why Lender Selection Matters

Not all lenders assess maternity leave the same way. Some take a strict approach, while others are more flexible if the deal is presented correctly.

This is where working with a broker can make a significant difference. The right lender selection, combined with the right structure, can mean the difference between an approval and a missed opportunity.

Planning Ahead Makes a Difference

If you know maternity leave is coming up or already underway, it is worth planning your finance strategy early.

Looking at your options before making a purchase can help you:

• Understand realistic borrowing capacity
• Structure the application correctly from day one
• Avoid unnecessary declines
• Move forward with confidence when the right opportunity comes up

Reach out to discuss your scenario and we can map out the right approach based on your timing, income, and long term plans.