Returning to School and Mortgage in Quebec | Strategies

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Returning to school is an increasingly common life event among Quebec homeowners, whether for a career change, professional development, or obtaining a graduate degree. This decision directly impacts mortgage management, as it often leads to a significant reduction in income. In Quebec, several financial aid programs exist for adults returning to school. The loans and bursaries program from Quebec's Ministry of Education and Higher Education is available to full-time students. However, homeowners should know that the net equity in their property may be considered when calculating financial aid. On the mortgage side, it is essential to plan the transition before leaving your job. Lenders assess repayment capacity based on current income. A borrower planning a return to school should ideally renegotiate or refinance their mortgage before the income drop, while they can still demonstrate stable income. Options include extending the amortization to reduce monthly payments, switching to biweekly payments to build a cushion, or setting up a home equity line of credit for access to liquidity if needed. Part-time studies while maintaining part-time employment, or full-time work with evening courses, are approaches that allow maintaining sufficient income for mortgage payments. A mortgage broker can help model different scenarios and optimize the mortgage strategy based on the expected duration of studies and the available budget.

Returning to School: Planning the Mortgage Transition

An increasing number of Quebec homeowners are choosing to return to school for career changes, to obtain advanced degrees, or to acquire new skills. While this enriching life project is commendable, it requires rigorous mortgage planning, as the income reduction that often accompanies studies can jeopardize the ability to maintain monthly payments. The key to success is preparing your strategy well before the first day of class.

Preparing Your Mortgage Before Returning to School

The most important step is to renegotiate or refinance your mortgage while you still have stable employment income. Lenders assess repayment capacity based on Gross Debt Service (GDS, maximum 39%) and Total Debt Service (TDS, maximum 44%) ratios, calculated on verifiable income. Once in school, your income will be insufficient to qualify for a new loan or refinancing. Take advantage of your current situation to optimize your mortgage terms.

Extend the amortization: If your renewal is approaching, negotiate an amortization extension (up to 25 or 30 years as applicable) to reduce your monthly payments to the minimum. This gives you breathing room during your studies.
Open a home equity line of credit: Access your equity by opening a home equity line of credit (HELOC) while your income qualifies you. This credit line will serve as a safety net if your finances become tight during school.
Build a mortgage emergency fund: Ideally, set aside the equivalent of 12 to 24 months of mortgage payments. This financial cushion will allow you to cover your payments even without regular employment income.
Assess available income during studies: Calculate the income you will maintain: part-time work, scholarships, research stipends, spouse's income, rental income if you rent part of your property.

Options for Maintaining Mortgage Payments

Part-time studies while maintaining employment: allows you to keep sufficient income while progressing in your academic program
Evening or online courses: a flexible option that preserves regular work hours and employment income
Renting a room or secondary unit: generates supplemental income to cover part of the mortgage payment
Scholarships and research stipends: some awards, particularly at the master's and doctoral level, offer substantial non-taxable income
Cooperative (work-study) program: allows earning income during internship terms

The Mortgage Broker's Role in Planning

A mortgage broker can play a decisive role in planning your return to school. They can model different income and expense scenarios to déterminé the optimal mortgage strategy. They can negotiate with your current lender to obtain the best possible conditions at renewal. If refinancing is advantageous, the broker can compare offers from multiple lenders. Finally, they can advise you on the ideal timing for making changes to your mortgage, taking into account your school start date and mortgage market conditions. Planning should ideally begin 6 to 12 months before the start of studies.

Frequently Asked Questions

Can I keep my mortgage if I return to school full-time?

Yes, your mortgage remains in effect as long as you make your payments. The lender cannot terminate your loan because you are returning to school. The challenge is maintaining sufficient income for payments. Advance planning is essential: build a financial reserve, reduce expenses, and explore supplemental income options.

Should I refinance before going back to school?

Ideally, yes. Refinancing is much easier when you have stable employment. You can extend the amortization to reduce monthly payments, consolidate high-interest debts, or access your equity through a home equity line of credit. Once in school with reduced income, qualifying for refinancing will be very difficult.

Do student loans affect my mortgage capacity?

Yes, student loans are considered debts in the calculation of debt service ratios (GDS and TDS). However, loans from Quebec's loans and bursaries program do not require repayment during full-time studies. Lenders will still consider the total balance of your debts during a potential renewal or refinancing.

Does student financial aid consider my property?

Quebec's loans and bursaries program may consider the net value of your assets, including your property, when assessing your financial need. However, exemptions and thresholds exist that vary based on your family situation. Consult the Quebec Student Financial Aid website for current rules.

What mortgage strategies do you recommend before returning to school?

Extend the amortization to reduce monthly payments. Switch to accelerated biweekly payments before the school year to build a cushion. Open a home equity line of credit as a safety net. Build an emergency fund covering at least 12 months of mortgage payments. Finally, consider renting part of your property to generate supplemental income.