The mortgage itself does not change when a child arrives; the budget around it does. When one parent goes on parental leave, household income often falls by a quarter or more while the payment stays the same. A family paying CZK 21,473 a month (CZK 4,000,000 over 30 years at 5.00 %) on net incomes of CZK 45,000 and CZK 35,000 goes from spending 27 % of its income on the mortgage to 37 %.
Most of what you can do happens before the birth: put a reserve aside, send an extra payment on the contract anniversary and check when your fixed period ends. If you are only now applying for a mortgage and one of you is already on maternity or parental leave, read Mortgage on maternity and parental leave instead. This article is for families who are already repaying.
What happens to your income
For the first 28 weeks after the birth, the mother receives maternity benefit (peněžitá pomoc v mateřství, PPM) of 70 % of her daily assessment base (§ 33 and 37 of Act No. 187/2006 Coll.). The benefit is not taxed, so on an average salary it comes close to the net wage. On higher incomes the drop is steeper, because the assessment base is cut back above statutory thresholds.
Parental allowance (rodičovský příspěvek) follows, CZK 350,000 in total. For children born from 2024 it must be drawn by the child's third birthday at the latest, and the parent chooses the monthly amount. At CZK 12,000 a month it lasts about 29 months.
The child tax credit helps the household too: CZK 15,204 a year for the first child, CZK 22,320 for the second and CZK 27,840 for the third and every further child (§ 35c of the Income Tax Act). For the first child that is CZK 1,267 a month, which the working parent claims through their employer. Costs rise at the same time, and whenever a bank reassesses you it deducts the child's subsistence minimum.
One family's budget
| Period | Household net income | Payment | Payment as a share of income |
|---|---|---|---|
| Before the birth | CZK 80,000 | CZK 21,473 | 27 % |
| Parental leave (allowance CZK 12,000, tax credit CZK 1,267) | CZK 58,267 | CZK 21,473 | 37 % |
| Parental leave, term extended to 30 years | CZK 58,267 | CZK 20,473 | 35 % |
| Back at work (same salaries) | CZK 81,267 | CZK 21,473 | 26 % |
The Novaks before the birth (assumptions: mortgage of CZK 4,000,000 over 30 years at 5.00 %, payment CZK 21,473; the child arrives after three years of repayments, when the outstanding balance is roughly CZK 3,814,000 by the annuity formula; the rate does not change).
- Extending the remaining term from 27 to 30 years: the payment falls to CZK 20,473, i.e. by CZK 1,000 a month. Over the whole term, though, they pay roughly CZK 413,000 more.
- An extra payment of CZK 300,000 on the contract anniversary, taken as a lower payment with the same term: the payment falls to CZK 19,784, CZK 1,689 a month less, and the interest bill shrinks.
- Doing both gives the lowest payment, but gives up the advantage of the shorter term.
The extra payment wins if it still leaves a reserve of at least six payments, i.e. CZK 128,838. Otherwise it is safer to extend the term and pay more again once you are back at work.
A payment calculation shows how the payment changes with a different amount or term. Shorter and longer terms are compared in A mortgage over 20 or 30 years.
What should you do about the mortgage before the baby arrives?
- A reserve. Three to six payments in a separate account, ideally before maternity leave starts, while two salaries are still coming in.
- An extra payment. Once a year you can repay up to 25 % of the original loan amount free of charge, provided the money arrives in the month before the contract anniversary. Ask for a lower payment rather than a shorter term; the procedure is in Extra mortgage payments.
- The end of the fixed period. Refixing with your current bank usually goes through without a new income assessment; refinancing with another bank does not. If the fixed period runs out while you are on parental leave, expect a switch to be harder and negotiate the rate with your own bank. The term can be changed at refixation as well.
- Insurance. Incapacity cover sold with mortgages often does not pay while you are receiving maternity benefit; UniCredit Bank's mortgage insurance, for example, excludes it explicitly. Check who the policy covers, and insure above all the income that will carry the payment after the birth. More in Payment protection insurance.
- Tax. The working parent claims the child tax credit in the declaration filed with the employer, from the month of birth.
What if the payment stops adding up after the birth?
Talk to the bank before you miss the first payment. You have no legal right to a payment holiday or a longer term, but banks do grant them by amendment where there is good reason. Interest keeps running during a payment holiday, so the debt or the later payments will grow. A bank will extend the term only after assessing your situation, and the age of the oldest borrower limits how far it can go.
A missed payment is recorded in the credit registers and makes refinancing harder later on. Further options, from restructuring to selling, are described in What to do when you can't repay.
A bigger flat for the family
You can sell a mortgaged flat and buy a bigger one even in the middle of a fixed period. Repaying the loan from the sale of the property is free if at least 24 months have passed since the loan agreement was signed. Some banks can move the lien to the new flat and increase the existing loan; others want a new agreement at the current rate.
A new application already counts the child in the household, so the same income supports a smaller loan than before the birth. If at least one of you is under 36, the LTV limit is 90 % rather than 80 %.
Sources
- Act No. 187/2006 Coll., on sickness insurance, § 33 (maternity benefit period) and § 37 (amount of maternity benefit)
- Act No. 117/1995 Coll., on state social support, § 30 et seq. (parental allowance)
- Act No. 586/1992 Coll., on income taxes, § 4(1)(g) and § 35c (child tax credit)
- Act No. 257/2016 Coll., on consumer credit, § 117 (early repayment, amendment effective from 1 Sept 2024)