Having a baby is a big step especially when you are also looking to move or buy your first home. If you are looking to extend your family and take out a mortgage here are some financial considerations to bear in mind.
Child benefit is no longer available to all families, if either you or your partner earns more than £50,000 you might not be eligible for some or all of the benefit. Child benefit is currently £20.50 per week for your eldest child and £13.55 for other children. It’s paid into your bank account every four weeks. Many mortgage suppliers will consider child benefit payments as an income when applying for a mortgage, check with your lender.
Statutory maternity pay (SMP) is the minimum amount of maternity pay an employer has to offer. Many employers offer more and you will need to check your contract to see what you are entitled to but generally SMP is paid for up to 39 weeks:
- For the first six weeks you get 90% of your average weekly earnings (before tax).
- For the next 33 weeks you get £138.18 or 90% of your average weekly earnings (whichever is lower).
Being on maternity leave will make a difference to your ability to apply for a mortgage – if you are on maternity leave some lenders will take your SMP as your current wage while others may take into account your full wage if proof of return to work is supplied.
The statutory weekly rate of Ordinary Paternity Pay and Additional Paternity Pay is £138.18, or 90% of your average weekly earnings (whichever is lower). Any money you get is paid in the same way as your wages (eg monthly or weekly). Tax and National Insurance will be deducted.
Fathers are entitled to 1 or 2 weeks paid Ordinary Paternity Leave OR up to 26 weeks’ paid Additional Paternity Leave – but only if the mother or co-adopter returns to work.
Every family is different and child care cost will differ depending on whether parents return to work or stay at home, The Family and Childcare Trust’s annual report from 2014 claims that the average fees for one child in part-time nursery and another in an after-school club are £7,549 per year and full-time childcare costs for a family with a two-year-old and a five-year-old child are estimated at £11,700 a year.
Lenders will take into account the extra cost of having children and any childcare costs you pay will be used in your application for a mortgage and taken into account regarding your affordability. You may need to provide bank statements to evidence your costs.
If you are looking to secure a mortgage and extend your family it’s advisable to speak to your lender about their individual policies and requirements. For more information on child benefits or family credits you may be entitled too then visit the government website www.gov.uk
About the author
Teachers Building Society was founded in 1966 and specialises in providing mortgages for teachers in England and Wales as well as residents of Dorset, Hampshire and Wiltshire. Teachers Building Society also provides savings accounts, fixed rate bonds and ISAs for anyone in the UK. Visit www.teachersbs.co.uk for more information.
Teachers Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration Number 156580. Allenview House, Hanham Road, Wimborne, Dorset, BH21 1AG.