Managing 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 financial strain.
Tip #1: If you can, start stashing money
Saving money is a common piece of advice, but we've made it more practical with two suggestions:
Set up a high-interest savings account specifically for mortgage or rent payments.
Automate payments from your cheque account to your savings account on payday.
Why this works: We create different buckets in our heads for pots of money based on their intended use, such as “rent” or “mortgage”, “groceries”, “baby gear”, etc. The technical term for this phenomenon is mental accounting. By putting your savings into an account dedicated to "rent" or "mortgage," you're less likely to use it for other expenses. Plus, automating payments means one less thing to worry about.
For more peace of mind, our Mortgage Rate Rise Tool to see how much extra you may need to save to cover potential rate increases.
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 pay ahead on your mortgage before you go on leave and taking a break while you’re on parental leave
Moving to an interest-only loan
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: Talk to a budget advisor for free
Feeling overwhelmed by your financial obligations? Financial mentors offer free and confidential support for debt management, budgeting, and accessing financial support. With over 200 independent organizations around the country, you can find a financial mentor near you to help you take control of your money.
To learn more about what financial mentors do, read our interview with Andrew Mitchell from the Salvation Army.
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 February 2022.
