How to manage your mortgage on parental leave: Tips for reducing the financial strain
Are you going on parental leave and worried about keeping up with your mortgage payments? We've got you covered with our top tips for reducing the short-term financial strain.
Tip #1: If you can, start stashing money
Before starting parental leave, review your current income, expenses, and debts to get a clear picture of your financial situation and how it might change during leave.
Saving money is a common tip, but let’s make it more actionable with these suggestions:
Set up a high-interest savings account specifically for mortgage or rent payments. Look for accounts with competitive rates offered by major banks in New Zealand.
Automate payments from your primary account to your dedicated savings account on payday.
Why this works: Mental accounting – the psychological practice of assigning specific uses for money – can be a powerful motivator. Having a separate account labelled “Mortgage Payments” can make you less likely to dip into those funds for other expenses. Plus, automating payments means one less thing to worry about.
Tip #2: Talk to your lender
Many lenders offer flexibility for borrowers on parental leave, such as:
Temporarily reducing your mortgage repayments
Pausing your payments altogether for a period of time
Allowing you to make lump sum payments before leave and reducing or pausing repayments during leave
Switching to interest-only payments
Extending the loan term
Your lender may have qualifying criteria for these options, so it's worth finding out about your options early.
⚠️ Health warning: these options reduce your payments now, but they could ultimately cost you more interest over the life of the loan.
Tip #3: Consider loan structure flexibility
Adjusting your mortgage structure can offer more flexibility during periods of income fluctuation. Options include:
Splitting the loan between fixed and floating rates to balance stability and flexibility.
Using a revolving credit or offset facility to manage income fluctuations and reduce interest by depositing extra funds.
Switching to a floating rate loan, which allows for lump sum payments without penalties, though typically at a higher interest rate.
Tip #4: Review your insurance policies
Ensure you have adequate coverage during parental leave. Review your income protection, life insurance, and trauma policies to confirm that they align with your current financial situation, especially with the new responsibilities of parenthood.
Tip #5: Seek professional advice
Navigating mortgage management during parental leave can be complex, especially if your financial situation changes significantly. A financial adviser or mortgage broker can provide tailored advice on structuring your loan for flexibility, negotiating with lenders, and exploring available support options.
If you’re feeling overwhelmed, financial mentors across New Zealand offer free and confidential support for budgeting, debt management, and financial planning. Visit MoneyTalks to find a mentor near you.
To learn more about what financial mentors do, read our interview with Andrew Mitchell from the Salvation Army.
Thinking of applying for a mortgage while on parental leave?
Timing can be crucial if you’re considering applying for a mortgage during or shortly before parental leave. Some lenders in New Zealand may require additional documentation, such as:
A letter from your employer confirming your planned return to work and expected income.
Evidence of savings or a clear plan to cover payments during leave.
Childcare quotes or other evidence of post-leave expenses.
Speak with a mortgage broker early to understand which lenders are more accommodating to parental leave applicants and to explore the most strategic timing for your application.
Crayon’s Financial Baby Prep Program helps prepare you for the financial challenges of parental leave with personalised, interactive tools and coaching. Ask your employer if they offer the program.
Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 12 May 2025.
