Is A Mortgage Deferral Right For You?
MORTGAGE DEFERRALS DURING COVID-19
With the recent federal business closure directives and layoffs, many people are looking for ways to adjust their budgets to decreased income the closures have caused.
The federal government CERB program and the EI coverage may help. You can check their website to see what funding will help your family in this trying time.
If, after crunching the numbers, you still come up short, what actions can help you get by until life returns to normal?
Financial consultants are suggesting, if it is possible, you should still make your payments. Use savings and available credit lines before deferring your mortgage.
Many banks are deferring credit card payments and interest on credit cards and credit lines or allowing clients just to pay interest payments. The deferred payments will still have to be paid. Be aware if you defer the interest, you might need to pay all the deferred interest with your first payment when the deferral ends.
MORTGAGE DEFERRAL CONSIDERATIONS
It is crucial to get all of the facts from your lender before you agree to a mortgage deferral.
If you can’t afford to pay your mortgage payment, lenders are offering people the ability to defer their mortgage payments due to the current financial conditions.
What Is A Mortgage Deferral?
The team at The Mortgage Group Calgary explains that mortgage deferrals allow you to take a break from your scheduled principal and interest payments for an agreed-upon time. The interest continues to accrue and will become part of your mortgage balance.
If you have been affected by COVID-19 and can’t make your mortgage payments, the first step is to contact your mortgage provider to discuss options. Most institutions have an email address as well as an online deferral request, as the phone lines have been hectic.
You must take a copy of that first email contact explaining you need assistance because of the COVID-19 crisis. In the email, include the mortgage ID information and the reason you cannot pay. For example, if you were laid off from work, fell ill with the virus and are in isolation, you are looking after children, or your business was forced to close. Then if the bank does not get back immediately, you have a record to the date of your notice.
Banks and Financial Relief
Most institutions will not be reporting to the credit bureau(s) at this time and understand that this is a challenging time for their customers. They will probably waive or refund the non-sufficient funds [NSF] fee for missed or stopped payments at this time. Meanwhile they are also taking time to assist customers individually.
“Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia and three other large lenders announced plans on March 17 to provide financial relief to Canadians impacted by the economic consequences of COVID-19. Mortgage deferrals are among the measures introduced.
Customers in good standing who have been impacted by the pandemic can apply, with deferrals available for an indefinite period and no deadline to apply,” said Mathieu Labreche, a spokesman for the Canadian Bankers Association, stated in a Bloomberg news interview.
So discussing the arrangements for the deferral, ask how the payments and insurance fees. Be sure to get the terms in writing.
Some choices of terms to consider are:
- To make your monthly mortgage & interest payments on a different timeline
- Pay just the interest & move the mortgage payment to the end of the policy. Add them to the amount of the overall mortgage and extend the mortgage term.
- Defer both, where the payments and insurance attach to the back of the mortgage. This again increases the amount of the mortgage and interest you will pay & extends the time it takes to pay it off.
- Some banks will average the deferred interest increases into the mortgage payments over the term of the mortgage when the deferral ends.
Case By Case
Rules for each bank are changing as the crisis lingers. Most mortgage companies are offering deferrals based on a case by case basis.
Labreche said that banks have processed over 213,000 requests in the last week, so they are moving quickly through applications. Still, you may need patience and persistence with the process.
There is stress on both sides of the phone line, so ask what suggestions they have to help your situation, or schedule a phone appointment to discuss your options. Sometimes it is frustrating because the agents are unaware of new developments offered by the bank. Some banks will refuse a deferral due to delinquent payments in the past and others are asking for a full credit check.
MONITOR YOUR CREDIT RATING
Your credit rating might be affected, so it is good to check to see if it has gone down. Credit rating notices are a computerized process. A deferral might automatically flag your credit rating. Equifax wrote about the impact on credit ratings and the COV19 crisis. If your score goes down, the credit bureaus suggest that it is due to COV19. It will help you in future banking/lending discussions.
It is important to note that everyone is struggling with recent events. Still, Canadians are good at supporting one another in crisis. Seek out the community and charitable resources in this time of need if you need them. Keep in contact with friends and family.
Alberta Health Services has phone resources and online material on its website for non-financial issues.
Talking to a money manager might give you other financial survival information. The Credit Counselling Society offers some excellent emergency budget management tips and online workshops.
The Mortgage Group Calgary team is an essential service and are adhering to social distancing requirements for the protection of their clients and staff. We cannot work directly with the bank on your mortgage deferral process. However, our brokers can help you if you are considering remortgaging or refinancing your mortgage. Give us a call at 403 571-8142 or email us at email@example.com to arrange a phone consultation.