Kiddipedia Financial Support Information

Kiddipedia Financial Support Information

Whether you are planning ahead or your bank has already said the numbers do not work, the answer usually comes down to one lender’s policy rather than a rule that applies everywhere.

By Jayden Vecchio, mortgage broker at Hunter Galloway

If a baby is somewhere in the plan, it is worth understanding how a lender will read your income before that income changes. And if your bank has already told you the numbers do not work, take a breath. That is one lender’s assessment. It is not automatically the answer across the market.

Nobody rings me wanting a lesson in lending policy. The real question is almost always the same one, and it usually gets asked quietly: has having a baby just put the home we were planning out of reach?

Sometimes the honest answer is not yet, and I will say so. But far more often than people expect, it comes down to which income the lender used, what proof they asked for, and how they handled the months before you go back to work.

One lender will use your confirmed return-to-work salary. The next will look only at what is landing in your account while you are on leave. A third will accept the income but want a bigger buffer sitting behind it. Same family, same week, three different answers. Nothing about you changed. The policy did.

We have a detailed guide to home loans on parental leave but the first thing I would want to know is why the numbers did not work in the first place.

THE STARTING POINT

A no from one bank is not a reason to ignore affordability. It is a reason to find out which of three things is actually in the way: your budget, a missing document, or that lender’s policy.

Why the Same Family Can Get Different Answers

The differences usually come down to five things:

  • Income during leave. Government Parental Leave Pay, employer-paid leave, annual leave and unpaid leave can all be treated differently.
  • Income after leave. Some lenders may use a confirmed return-to-work salary if the lower-income period is properly covered. Others stay closer to the income being received now.
  • Part-time or casual work. A permanent part-time return is often easier to evidence than a casual return with no recent history.
  • The cash buffer. Some lenders want to see enough savings to cover the gap between leave income and the confirmed return income.
  • The new budget. The lender will include the new dependant, childcare, existing debts and normal household spending.

This is not something you should have to work out on your own while you are also growing or feeding a small human. I can run the same household through suitable lender policies before anyone lodges another application, or before you accept the first answer as final.

Sophie’s Story: One Letter Changed the Result

Ben called us about six months after the twins arrived. Nobody in that house was sleeping much, and somewhere between the night feeds they had worked out that the place they were living in was never going to fit the family they now had. That is a hard thing to sit with at three in the morning. Sophie had earned about $120,000 before leave and planned to take around 12 months off. She expected to return part-time on $80,000 to $90,000. Ben is a doctor and was picking up plenty of overtime on top of his base. They had about $150,000 saved and were looking around the $1 million mark in Melbourne.

I did not use Sophie’s old $120,000 salary, because that was not the plan anymore and pretending otherwise helps nobody. We modelled the loan on an $80,000 return-to-work income and worked out what a suitable lender would need in order to accept it.

The key document was a letter from Sophie’s employer confirming her return date, hours and salary. The lender also wanted the couple to keep about $40,000 after the deposit and costs so they could cover the lower-income period before Sophie returned to work.

With the letter and buffer in place, the initial model showed estimated borrowing power around $1.3 million, above their target. Without it, the same lender would have worked from Ben’s income alone, and the number fell by $600,000 to $700,000. One page out of an HR inbox was the difference.

Ben’s overtime was real money, but it could not do the job on its own. Two incomes also stretch further than one large one, because the tax is spread across two sets of brackets instead of stacking on top of Ben’s. That is why Sophie’s $80,000 counted for as much as it did, part-time and still a year away.

None of that was an approval, and it was not a reason to borrow the maximum. It simply showed that the twins were not the deal-breaker. What the lender needed was a clear return plan and enough money to bridge the gap.

Names have been changed. The figures come from a real Hunter Galloway case and are estimates based on lender policy at the time.

The One-Page Letter That Matters Most

The employer letter causes more avoidable delays than anything else I see. HR will usually write something warm, along the lines of how much everyone is looking forward to welcoming you back next year. Lovely to receive, and almost useless to a credit assessor.

Ask the employer to confirm:

  • the approved parental-leave start and end dates
  • the confirmed return-to-work date
  • the number of hours or days to be worked each week
  • the gross annual salary or hourly rate on return
  • whether the role will be full-time, permanent part-time, fixed-term or casual
  • the writer’s name, position, signature and the date of the letter

If you are going back on reduced hours, get it agreed in writing before you apply. A kind conversation with your manager is not something a lender can verify, however genuine it was.

A SIMPLE WORDING GUIDE

This is to confirm that [name] is currently on approved parental leave and is expected to return on [date], working [hours or days] per week. Her gross salary or hourly rate on return will be [amount], and her employment will be [full-time, permanent part-time, fixed-term or casual].

Fair Work explains the process for returning to work after parental leave and requesting flexible work arrangements.

The Family Budget Still Has to Work

A more flexible lender policy does not make an unaffordable loan affordable, and I am not going to pretend otherwise. You still have to get through the lower-income months and then absorb the costs that land the moment work starts again. Childcare is usually the big one.

It is worth knowing what a child costs you on paper as well as in the bank account. As a rough guide, and it moves with your income and the lender, each dependent child takes somewhere around $40,000 to $50,000 off your borrowing capacity before childcare is even counted. For Ben and Sophie, the twins took roughly $80,000 to $100,000 off the top, and the loan still worked. It is a real cost, not a wall.

So I run the household budget twice. Once for the leave period, and once for after you are back, with the new hours, childcare and commuting in it. That will tell you far more than the pre-baby budget ever could.

Moneysmart has a practical guide to planning the costs of having a baby.

Lenders also test the mortgage at a higher rate than the customer will initially pay. APRA confirmed in May 2026 that the minimum serviceability buffer remains three percentage points. That is one reason the lender’s result can look lower than the family’s own repayment calculation.

An Existing Home Loan May Have Options You Have Never Used

If you already have a mortgage, it is worth checking what your current loan can do before you assume the repayment is fixed in stone.

Westpac has a parental-leave repayment reduction for some existing customers with eligible variable loans. The loan must have had at least 12 months of principal and interest repayments. Subject to approval and other conditions, the minimum repayment may be reduced by up to 50 per cent for up to 12 months.

This is not a payment pause. Interest continues, the loan may reduce more slowly and repayments can increase afterwards. The property equity, repayment history and loan product also need to meet the conditions.

I would not move a home loan for one feature. The point is that there may be options sitting in the loan you already have that you have simply never had a reason to ask about.

Westpac customers can read the current parental-leave repayment reduction information.

Sometimes the Right Answer Is “Not Yet”

Tom and Nikki came to us while Nikki was on parental leave. Partway through, her role was made redundant. Rather than go looking for another employer, she decided to start her own business. That was almost certainly the right call for the family, and the worst possible timing for a home loan.

Most lenders want two years of tax returns before they will use self-employed income. A few will look at one year in the right circumstances. Almost none will do it for someone who is also on parental leave, because that is two big changes landing at once and policy is not built for it. Going back to a different employer as a casual has its own timeline: you need enough hours on the record for a lender to see a pattern, and you need to know how many hours you can realistically work once you have childcare sorted.

So we paused. My job is not to keep knocking on doors until somebody says yes. Sometimes it is to say not yet, and then set out exactly what has to become clearer first. For Nikki that means either a full financial year behind the business, or a few months of steady payslips from a job she has chosen around the childcare she can actually get.

THE POINT I WOULD REMEMBER

Check your loan position before your income changes rather than after. And if a bank has already said no, find out why before you accept it as final. The missing piece is usually a return-to-work letter, a savings buffer, a more realistic budget or simply a different lender.

Compare the Lenders Before You Apply

At Hunter Galloway, we are mortgage brokers with access to more than 30 lenders. I can compare how suitable lenders treat parental-leave income, return-to-work salary, part-time or casual hours, savings buffers, childcare and existing-loan features before another application is lodged, and ideally before your income changes at all.

We are based in Brisbane and help people across Australia. There are no fees for our service. We are usually paid by the lender if the loan settles, and that payment is disclosed in writing.

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GENERAL INFORMATION ONLY

This article is general information only. It does not consider your objectives, financial situation or needs and is not personal financial, credit, tax, legal, employment or Centrelink advice. Lending policies and government rules can change. Client stories are real Hunter Galloway cases with names and identifying details changed and figures rounded. Obtain advice specific to your circumstances before acting. Westpac product eligibility, credit criteria, fees, charges and conditions apply and may change.

About the Author

Jayden Vecchio is a Brisbane-based mortgage broker at Hunter Galloway who helps first-home buyers, professionals and families across Australia. He was named FBAA Broker of the Year 2017 in the National and Commercial categories.

0481 615 063  |  jayden.vecchio@huntergalloway.com.au  |  Mortgage Broker Brisbane – Hunter Galloway  |  Credit Representative 476903, Australian Credit Licence 389328.