Key Takeaways
- Many lenders may assess the salary you return to instead of your leave pay, provided a return-to-work letter confirms your date, hours and pay.
- Parental Leave Pay is usually treated as temporary income, so savings may need to cover repayments until your salary resumes.
- Lenders typically prefer a return to work within 12 months, and a later return can narrow your options.
- Childcare costs, part-time hours and a 3-percentage-point assessment buffer can all reduce borrowing power after you go back.
The property is right, the finance conversation is booked and your latest payslip now shows Parental Leave Pay instead of your usual salary. Getting a home loan while on parental leave may still be possible in Australia. The outcome may depend less on what you earn this month and more on what a lender can confirm you will earn when you return.
A lender that counts your return-to-work salary may produce a very different borrowing figure from one that counts only your leave pay. Running both numbers through a borrowing power calculator before you apply can show how wide the gap is for your household.
How Lenders Assess Income on Parental Leave
Each stage of your leave, and each type of pay you receive during it, may be treated differently. The income types and stages that typically shape the assessment are:
Return-to-Work Salary
Many lenders may assess the salary you will earn when you return to work, provided your employer confirms it in writing. For a borrower on leave, this is usually the figure that decides whether the loan works.
Your capacity to repay is assessed over the full loan term, and a confirmed permanent role with a set return date gives a lender a stable figure to rely on. Without that confirmation, a lender may have little choice but to assess the income you are receiving now.
Parental Leave Pay
Government-funded Parental Leave Pay is usually treated as temporary income, so many lenders leave it out of their long-term serviceability calculation. Services Australia lists the Parental Leave Pay rate as $1,004.70 a week before tax from 1 July 2026. The rate usually changes on 1 July each year.
Under the Paid Parental Leave scheme, a child born or adopted from 1 July 2026 attracts up to 130 days of Parental Leave Pay, which is 26 weeks on a five-day week. Because the payment ends on a known date, a lender may count it only for the months it covers, if at all. It can still help show how repayments will be met before your salary resumes.
Employer-Paid Leave
Employer-paid leave is often read differently from the government payment, because it comes from your ongoing employer and appears on your normal payslip. Some employers pay full salary for a set number of weeks, while others let you stretch the same entitlement over twice the time at half pay.
A lender may count employer-paid leave for the period it runs, then switch to your return-to-work salary. Half pay lengthens the period with income but lowers each payment, which may matter when a lender checks whether repayments are covered month by month.
Part-Time Salary
Returning on fewer days usually means the lender assesses your part-time salary, not your pre-leave full-time pay. For example, a parent who earned $110,000 full time and returns three days a week may be assessed on roughly $66,000, depending on how the employer pro-rates pay.
Staged returns, such as three days rising to four after six months, are typically assessed on the confirmed starting hours. Some lenders may consider the later increase when the employer commits to it in writing, while others will not.
Unpaid Leave
Unpaid leave usually means a lender counts no income from you for that period, so it looks closely at how each repayment will be met until your salary starts again. Under the National Employment Standards in the Fair Work Act 2009, employees with at least 12 months of service can take up to 12 months of unpaid parental leave and may request up to a further 12 months.
During that period, repayments typically come from your partner’s income, your savings or both.
Factors That Change Your Borrowing Power on Leave
Once leave is part of the picture, the factors that typically move your borrowing figure are:
Savings Buffer
A lender may want to see enough savings to cover repayments for the months your income is reduced or paused. The amount usually depends on the gap between your household income during leave and your repayments plus living costs.
For a household that falls $1,500 a month short over five months of unpaid leave, that could mean about $7,500 set aside on top of the deposit and purchase costs. Lenders often check how those savings were built under their genuine savings rules. Where holding a buffer leaves you with a smaller deposit, a low deposit home loan broker can explain how lenders may treat a deposit under 20% alongside a leave period.
Childcare Costs
Lenders usually add expected childcare costs to your living expenses from the date you plan to return. Depending on its policy, a lender may assess these fees before the Child Care Subsidy is confirmed or after deducting an estimate of it.
Because your return-to-work salary and childcare costs tend to start at about the same time, the gain from one may be partly offset by the other.
Assessment Rate
Banks regulated by the Australian Prudential Regulation Authority (APRA) typically test your repayments at a rate at least 3 percentage points above the one you will actually pay. APRA confirmed on 28 May 2026 that this serviceability buffer would stay at that level, and it reviews the setting periodically.
On a loan at 6%, for example, repayments would be assessed at about 9%. During leave, that test rate is applied to whichever income the lender accepts, so a household relying on one salary may feel the buffer more than it would once both incomes return.
Partner Income
A partner’s income can carry the application on its own when it covers repayments at the assessment rate plus household expenses, including the costs of a new child. In that case, the parent on leave may not need to be assessed on any income.
Where one income falls short, the application typically depends on the lender accepting the on-leave parent’s return-to-work salary. Both parents usually still need to be on the loan when both will be on the title, even when only one salary is counted.
Debt-to-Income Ratio
Your debt-to-income (DTI) ratio compares total debt with gross income, and the income a lender uses makes a large difference. Under APRA’s current settings, banks can write up to 20% of new owner-occupied and investment loans at a DTI of 6 times or higher, so high-DTI loans are limited but not ruled out.
A $700,000 loan against a combined return-to-work income of $180,000 gives a DTI of about 3.9. Assessed against one salary of $110,000 alone, the same loan sits above 6, which may leave fewer lenders willing to proceed.
Timing Your Application Around Parental Leave
The picture a lender sees of your income changes with each point in your leave. The timing options worth weighing up are:
Applying Before Leave Starts
Applying while you are still working lets the lender see full payslips, but it does not remove the leave from the assessment. Once leave is booked, the lender will typically want the same return-to-work details it would ask of someone already on leave.
Pre-approval and documents can then be sorted before the baby arrives.
Applying Partway Through Leave
Applying partway through leave usually works well when your return date is confirmed and your remaining savings comfortably cover the months still to run. A parent four months into a 12-month leave, with a signed return date and a buffer in place, may present a clearer case than one with an open-ended return.
Lenders may look harder at an application where savings have been drawn down heavily during leave. A large purchase during that time, such as a car, can affect the result.
Applying After Returning to Work
Waiting until you are back at work gives the lender current payslips at your actual hours, which can simplify the assessment. Some lenders may want one or two payslips after your return, and some may ask for more when your role or hours have changed.
Property prices, interest rates and your own circumstances may shift while you wait. A change of employer on return could also bring a probation period into the assessment.
Applying With Leave Beyond 12 Months
A return date more than 12 months away typically narrows the number of lenders willing to count your future salary. Many lenders build their parental leave policies around a return within that window, which lines up with the initial unpaid leave entitlement under the National Employment Standards.
Beyond that point, the application may need to stand on your partner’s income alone or wait until a return date is closer.
Extending Leave Before Settlement
Extending your leave after approval can count as a material change, and a lender may reassess the loan before settlement. It may request an updated employer letter or, in some cases, withdraw approval.
Your settlement date is set in your contract of sale, so a decision to extend leave may need to reach your lender before that date, not after it.
Disclosure Rules When You Are Pregnant or Planning Leave
Pregnancy is personal, but a planned change to your income is something lenders are required to consider. The rules, protections and risks that apply are:
Reasonable Inquiries Under Responsible Lending
Lenders and brokers must make reasonable inquiries about your financial situation under the National Consumer Credit Protection Act 2009 (NCCP Act). The Australian Securities and Investments Commission (ASIC) sets out how this works in its responsible lending guidance.
Part of that duty involves considering changes that are reasonably likely to affect your ability to repay. A lender is generally concerned with the effect on your income and expenses, not the personal reason behind it.
Protection Against Pregnancy Discrimination
The Sex Discrimination Act 1984 makes it unlawful to treat someone less favourably because they are pregnant or might become pregnant, including in services such as banking. A lender may still assess how leave changes your income and expenses, because that goes to your capacity to repay.
Where you believe an application was handled differently because of the pregnancy itself, the Australian Human Rights Commission accepts complaints under the Act.
Foreseeable Changes in Your Application
Most loan applications include a question or declaration about known changes to your income or expenses in the near future. Booked parental leave, a planned return on part-time hours and expected childcare costs usually fall within it.
Answering accurately may not by itself lead to a decline. It usually means the lender assesses you under its parental leave policy.
Consequences of Leaving Leave Plans Out
Leaving planned leave out of an application may mean the loan is assessed on income you will not have for months. Repayments could then prove harder to meet than the approval suggested.
An inaccurate declaration may also give the lender grounds to review or withdraw approval if the omission comes to light before settlement. Disclosing early usually leaves more room to find a lender whose policy fits your plans.
Documents for a Parental Leave Home Loan
A parental leave application typically needs more paperwork than a standard one, because the lender is assessing future income as well as current income. The documents usually requested are:
Return-to-Work Letter
This letter from your employer is usually the document that matters most. It typically confirms your role, that the position is permanent, your leave dates, your return date, your hours on return and your salary.
Some lenders also ask for the employer’s Australian Business Number (ABN) and a signatory’s contact details. A vague or unsigned letter can slow the application.
Pre-Leave Payslips
Recent payslips from before your leave show the salary your return-to-work figure is based on. Lenders commonly ask for the last two or three issued before leave began.
Notice of Assessment
Your latest Notice of Assessment from the Australian Taxation Office (ATO) helps confirm your income history, particularly where your pay includes overtime, allowances or bonuses.
Leave Pay Schedule
A schedule of any leave pay from your employer or the government shows how much you receive and when each payment stops.
Savings Statements
Account statements show the buffer set aside for the leave period and how it was built, usually covering the last three to six months.
Childcare Cost Estimates
An estimate from your intended childcare provider lets the lender assess your expenses from your return date instead of relying on a general benchmark.
This is a general guide only. Document requirements vary between lenders and may change depending on your employment type and loan size.
Securing Your Return-to-Work Letter
A practical next step is asking your employer for a signed return-to-work letter before you apply. With that letter in hand, a lender may be able to assess the income you are going back to instead of only your leave pay.
If you are weighing up a purchase while on parental leave, the team at Shern Advisory can talk you through the options that suit your circumstances.
Frequently Asked Questions (FAQs)
1. Do lenders treat paternity leave differently from maternity leave?
Lenders generally apply the same parental leave policy regardless of which parent takes the leave. What they assess is the length of leave, the pay received and the confirmed return date.
The main difference in practice is length. For a child born or adopted from 1 July 2026, Services Australia reserves 20 days of Parental Leave Pay for a partner when the claimant has one, and a shorter absence within those days may have less effect on the assessment than a longer one.
2. Can my partner apply for the home loan alone while I am on leave?
Where your partner’s income alone passes the lender’s assessment, the loan and the title would usually be in their name only.
That choice affects who legally owns the property. Adding you to the title later may involve refinancing and duty questions.
3. Can I use the 5% Deposit Scheme while on parental leave?
Being on parental leave does not by itself exclude you from the Australian Government 5% Deposit Scheme, which Housing Australia administers and which was called the Home Guarantee Scheme until 1 October 2025. You still need to meet the participating lender’s serviceability requirements, so the same return-to-work assessment applies.
The scheme helps with the deposit and lenders mortgage insurance (LMI), not with income. A first home buyer broker can explain how a participating lender may assess leave income alongside the scheme’s conditions.
4. Does Family Tax Benefit count as income for a home loan?
Some lenders may count Family Tax Benefit (FTB) as income, usually only while the child is young enough for the payment to continue for a reasonable period. Others exclude it or apply a discount.
Because FTB depends on family income, the amount you receive during leave may fall once both salaries resume. A lender that counts it will typically use the amount likely to continue, not the higher amount paid during leave.
5. Can casual or self-employed parents get a home loan on parental leave?
It may be harder, because a casual role may carry no set hours on return and self-employed income has no employer to confirm it. Lenders usually look instead at longer income history, such as extended payslip records or tax returns and business financials, along with evidence that work will resume.
Because employment type affects loan approval well beyond leave, the lenders that may accept paused income from a casual or self-employed parent can differ from those that suit a salaried employee.
6. Can I refinance my home loan while on parental leave?
Refinancing on parental leave is assessed much like a new application. The new lender will typically want your return-to-work letter and evidence of how repayments are covered during leave.
For that reason, some borrowers find it simpler to refinance before leave begins or after they return. Where a lower rate or different loan features would ease the leave period, a refinance mortgage broker can compare how lenders on our panel may treat your leave income.
7. Can I reduce repayments on my home loan during parental leave?
Depending on your lender and loan contract, options may include a temporary switch to interest-only repayments or a hardship arrangement for a set period. You may also be able to draw on offset or redraw funds, and each option can affect the total interest paid over the loan term.
Raising a change with your lender before repayments become difficult usually leaves more options open.
This article contains general information only and does not take into account your objectives, financial situation or needs. You may wish to speak with a qualified professional before acting on any of it.