Preparing Your Mortgage for a Child's Arrival

A child's arrival is a joyful moment requiring proactive financial planning for your mortgage in Quebec. The parental leave period, while supported by QPIP, brings a temporary income drop of 25 to 30% that can put your budget under pressure. Proper preparation transforms this challenge into a stress-free transition.

Planning before parental leave

1. Build a financial reserve: Ideally 3 to 6 months of mortgage payments in accessible savings (TFSA or savings account). This reserve covers the difference between your regular income and QPIP benefits. For a $2,000 monthly mortgage payment, aim for a $6,000 to $12,000 reserve.
2. Evaluate your space needs: If a move to a larger property is planned, act BEFORE parental leave. Your mortgage qualification will be based on your full employment income, not parental benefits. The difference can represent $50,000 to $100,000 in additional borrowing capacity.
3. Maximize prepayments while both incomes are available: Take advantage of the months before leave to make lump-sum prepayments and maximize your annual prepayment privileges. Every dollar paid now reduces future interest and gives you more room during the reduced income period.
4. Adjust your payment frequency if necessary: If you are on accelerated bi-weekly and the budget will be tight during leave, consider temporarily switching to standard monthly. You can return to accelerated bi-weekly after returning to work.
5. Check your insurance: A child's arrival increases the need for protection. Ensure your life insurance covers at minimum the mortgage balance. Individual insurance is often more advantageous than lender insurance.

During parental leave

QPIP offers 70 to 75% of income for the basic plan (25 weeks maternity, 5 weeks paternity, 32 weeks shareable parental) or 75% for the special plan (shorter but better compensated). During this period, the Canada Child Benefit (fédéral) and Quebec Family Allowance (provincial) provide monthly tax-free income that helps offset the income drop. These allowances, combined with QPIP benefits, allow the majority of families to maintain their mortgage payments without difficulty.

After returning from leave: resuming acceleration

Upon returning from parental leave, your income returns to normal. This is the ideal time to resume acceleration strategies: return to accelerated bi-weekly if you had temporarily reduced your frequency, resume annual lump-sum prepayments, and consider a payment increase if your income has grown. The Canada Child Benefit continues to provide additional income that some families choose to direct entirely to mortgage prepayments. An AMF-certified broker helps you plan the transition and optimize your mortgage strategy around this life event.