Parental leave is one of the most common reasons NZ buyers face mortgage complications — not because it disqualifies you, but because the timing of your application relative to your leave date makes a significant difference to what income the bank will count.
The best strategy is to get pre-approval before going on parental leave, using your full employed income. Banks generally do not count government parental leave payments as qualifying income for a new mortgage. If you're already on leave, your partner's income and a confirmed return-to-work date significantly improve your position.
How Banks Treat Parental Leave Income
Government paid parental leave (PPL) in NZ is administered by IRD and paid at up to $712.17 per week (as of 2025–26, subject to annual adjustment) for up to 26 weeks for the primary carer. A further 2 weeks of partner/paternity leave is available.
Major NZ banks’ standard position:
- Government PPL payments are not counted as qualifying income for a new mortgage application
- The reason: PPL is temporary and finite — banks assess your ability to service the loan over decades, not weeks
- Some banks may count PPL as supplementary income if it’s within the final weeks of a paid leave period, but this varies by lender
This means if you apply for a mortgage while receiving only PPL, most banks will assess you as having zero or very limited qualifying income.
Strategy 1: Apply Before Going on Leave (Recommended)
The most effective approach is to get pre-approval while still in full-time employment — using your employed salary as the qualifying income.
Pre-approval timeline:
- Pre-approval is typically valid for 60–90 days at most banks, sometimes up to 6 months
- Apply as close to going on leave as possible to maximise the validity window
- Be transparent with the bank — they will ask about known income changes
Key considerations:
- You may need to disclose that you’re pregnant and planning leave — banks cannot discriminate on this basis under the Human Rights Act
- Pre-approval confirms maximum borrowing capacity, not an unconditional commitment
- The final loan approval (when you go unconditional on a property) requires current income verification — this needs to happen before you go on leave, or within the pre-approval period
If the pre-approval lapses before you find a suitable property, you’ll need to reapply — which means reapplying while on leave with the income challenges that creates.
Strategy 2: Joint Application Using Partner’s Income
If both partners’ names are on the mortgage application, the bank assesses combined income. If your partner’s income alone is sufficient to service the loan (under the DTI 6× cap and serviceability stress test), your own income going on leave becomes less of an issue.
This works well when:
- The partner has stable, full-time employed income
- The partner’s income alone can service the proposed mortgage at the stress-test rate
- The deposit is sufficient for the target property
It becomes more complex when:
- Both incomes are needed to meet the bank’s serviceability threshold
- The partner is also a contractor or self-employed
In cases where both incomes are needed, banks will typically ask about your return-to-work date and may require a letter from your employer confirming the position is being held open.
Strategy 3: Return-to-Work Confirmation Letter
If you’re currently on leave and need to apply, a letter from your employer confirming:
- Your planned return date
- That your position is being held
- Your salary on return
…can allow banks to use your pre-leave income as a qualifying figure. Not all banks accept this, and those that do may apply a discount (e.g., counting 80% of your return salary to account for the income gap period). A mortgage broker will know which banks are most flexible on this.
Taking a Mortgage Holiday During Parental Leave
If you already have a mortgage and are going on parental leave, a mortgage repayment holiday may be appropriate. During a mortgage holiday:
- Repayments are paused for an agreed period (typically 3–6 months)
- Interest continues to accrue and is capitalised onto your loan balance
- On a $600,000 mortgage at 5.8%, a 3-month holiday adds approximately $8,700 to your loan
This increases your loan balance and total interest paid. An alternative is switching to interest-only repayments during leave — this keeps the balance from increasing while reducing the monthly payment.
See the mortgage holiday guide for detailed cost comparisons.
KiwiSaver and First Home Purchase on Parental Leave
If you’re a first home buyer and plan to use KiwiSaver for a deposit, parental leave does not affect your KiwiSaver withdrawal eligibility — it’s based on membership period and prior home ownership status, not current employment status. You can still apply for a KiwiSaver first home withdrawal while on parental leave.
Frequently Asked Questions
Does parental leave income count for a NZ mortgage application?
No — government paid parental leave payments are generally not counted as qualifying income by major NZ banks. The standard approach is to apply before going on leave using your full employed salary, or to rely on a partner’s income if it’s sufficient alone.
Can I get a mortgage while I’m already on parental leave in NZ?
Yes, but it’s more difficult. Most banks will require a confirmed return-to-work date and an employer letter confirming your position and salary. Your partner’s income may need to carry the serviceability assessment. A mortgage broker is recommended for this situation.
How long is pre-approval valid in NZ?
Most NZ banks offer pre-approval valid for 60–90 days, though some extend this to 6 months. Apply as close to your leave date as possible to maximise the window during which the pre-approval remains current.
Can my employer prevent me from taking out a mortgage on parental leave?
No. Banks cannot decline a mortgage application solely because you are pregnant or on parental leave — this would breach the Human Rights Act. However, they can (and do) decline based on insufficient qualifying income during the leave period.
What is the government paid parental leave rate in NZ in 2026?
As of 2025–26, the maximum government PPL rate is $712.17 per week for up to 26 weeks for the primary carer. This is adjusted annually. Check ird.govt.nz for the current rate and eligibility criteria.