At this very uncertain time, there are options available for homeowners. Many people are experiencing financial hardship due to COVID-19 or just want to save on expenses given the unpredictable future during this pandemic.
There are a variety of deferral options that you should research and consider during this time. A deferral is an agreement between you and your lender (your bank or your mortgage professional) indicating that you have agreed to pause or suspend your mortgage payments for a certain amount of time. Six of Canada’s largest banks, and possibly others, have announced they would be allowing mortgage payment deferrals of up to six months. CMHC has also made it clear that Canadians who are struggling to make their mortgage payments will have options in order to save them from potential defaults.
It is important to understand that a deferral is a pause of payment, not a cancellation and interest will continue to accumulate and be added to your debt.
If you think you may be unable to make an upcoming payment, either mortgage or utility, the first thing to do is reach out before you miss the payment. Getting through may take longer than expected given the high volume or people with similar concerns so don’t leave it until the last minute. They’ll discuss your options and come up with a plan that works for your financial situation.
A few questions to ask or consider:
- How long are they offering deferrals?
- Will the deferred interest be added to the principal of the loan?
- Will your mortgage payments increase to compensate for the deferred payments?
- Will the deferred payment be reported to the credit bureaus and have any effect on your credit?
- Are there options available to refinance and lower your payments?
There are solutions available so reach out to your lender or we can refer you to a mortgage expert if you have additional questions or want a second opinion in regard to your situation.
Deferral options have also been announced for utility payments and student loans so it is important to look at all your options.
When things do get “back to normal,” remember that the total amount owing on your deferred payments will be higher due to the interest that has accrued. Deferrals are an option that should be considered but it is not something that should be taken lightly.