Is Mortgage Deferral For You?

In response to the numerous questions about deferring mortgage payments, here is some updated information.

As information is changing daily, if you have any questions, please contact me directly to discuss your financial situation. I have experts on my team. The following information is a general guideline, each lender deals with things a little differently. Here’s what you need to know. 

In response to the Covid-19 crisis; for those individuals financially affected, most financial institutions have announced that payment relief may be available for up to 6 months of deferred mortgage payments.

Do I qualify for deferred payments?

It is up to each lender to decide whether you qualify based on their qualification guidelines.  Most financial institutions are allowing deferrals of up to 6 months if you don’t have any other means of making your mortgage payments.

Should I defer my mortgage payments?

If you are experiencing financial hardship from income loss or reduction due to COVID-19 and don’t have the means to pay your mortgage, then it may make sense to apply for a deferral with your lender. 

Good advice is only to contact your lender if you have an immediate need and you would otherwise default on your payments.

Applying to defer your mortgage payments:

Before making an application to your lender for deferred payments, look into what government support programs may be available to you. Depending on whether you are an employee or a business owner, you may qualify for one or more of the programs under Canada’s COVID-19 Economic Response Plan.

If you feel that there is a risk that you could default on your mortgage, then contact your lender as soon as possible. Be patient, lenders are extremely hard to get a hold of now. Use online portals as available. 

How does the deferral work?

Each lender has their own deferral payment policy.

Here are a few examples:

Scotia Bank: Customers can defer mortgage payments for up to 6 moths on a primary residence and rental property by going to scotiabank.com. The interest will accrue and will be added to the mortgage balance at the end of the deferral period. Payments will be slightly higher after the deferral period as the amount is incorporated into the monthly payment when mortgage payments resume. Scotia requires a minimum 2 weeks notice, if you want to cancel your mortgage payment deferral before the end of the deferral period.

TD BANK: Customers can defer mortgage payments up to six monthly payments by going to TD.com. The interest on your mortgage continues to accrue but it is added to your outstanding mortgage principal instead of becoming due on your usual payment dates.

*Any deferral granted will not apply to tax and insurance payments, which must continue to be paid by you.

Will deferring mortgage payments impact my credit score?

Lender approved deferrals are not expected to have any impact on your credit rating as long as the request was made and approved. However, if you don’t communicate with your lender and just skip a payment, it could negatively impact your credit score. With the overwhelming number of deferral applications, there will be errors, but all lenders are saying they will work to correct any issues if they arise.

Other mortgage options:

Payment deferral isn’t the only option you have at this time. You may qualify for any of the following:

  • A mortgage refinance
  • Restoration of your original amortization (to lower your payment)
  • Negotiated reduction of payments

If you are in a place where COVID-19 has financially impacted you, and you need someone to discuss all your options – including deferring payments, please contact me anytime. I have experts on my team.

Source: Kathryn Martin, Mortgage Specialist