Deferring Mortgage Payments. (Covid-19)
Expert Financing • March 24, 2020
In response to the Covid-19 crisis; for those individuals financially affected, banks and the government have announced that payment relief may be available for up to 6 months of deferred mortgage payments.
As information is changing daily, or hourly, if you have any questions, please contact us directly to discuss your financial situation. The following information is a general guideline, each lender deals with things a little differently. So, here’s what you need to know.
Do you qualify for deferred payments?
Just because lenders are offering deferred mortgage payments, doesn’t mean you will qualify. Lenders are looking at each case individually and will only offer deferral upon their sole discretion. If you haven’t experienced income disruption, you won’t be eligible for payment deferral.
To qualify, you will have to prove not only that you have been directly financially impacted by Covid-19, but that you have no other means of making your mortgage payments. In other words, you have to prove genuine financial hardship.
Before making an application to your lender for deferred payments, you should consider applying for EI and continue making your payments as scheduled. Good advice is only to contact your lender if you have an immediate need and you would otherwise default on your payments.
Deferred doesn’t mean free
To be clear, deferred does not mean free. If you defer your payments for up to 6 months, you will still be responsible for paying that money to the lender. In fact, at most lenders, deferred payments could be added on to the principal mortgage amount and could incur additional interest.
Once your payments are resumed, they might increase your regular payment to maintain your existing amortization schedule.
Applying to defer your mortgage payments
If you are in a place where your only option is to defer payments, so you don’t get behind or default on your mortgage, you should contact your lender directly. Should you call and not get through, consider sending an email. Here is a template for you to follow. Edit as required.
Subject: “your name” & “mortgage #”
My name is “your name”. I would like to inquire about mortgage payment relief. My income has been disrupted by the Covid-19 virus, and I have limited means to make upcoming mortgage payments.
My address is “insert address”, and my contact information is “provide the best way to contact you”.
Please advise of the next steps.
“your name.”
Will deferring mortgage payments impact your credit score?
The simple answer is, no. A lender approved deferral is not like missing a mortgage payment. However, if you don’t communicate with your lender and just skip a payment, it could negatively impact your credit score.
Now, the truth is, payment deferral shouldn't impact your credit score, BUT, in these unprecedented times, and with the overwhelming number of deferral applications and banks having never handled anything like this before, it wouldn’t be a big stretch to imagine that mistakes could be made. Misinformation could get misreported to the credit bureaus.
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)
Hold a payment (during a temporary suspension of income)
Negotiated reduction of payments
If you are in a place where the Covid-19 has financially impacted you, and you need someone to discuss all your options - including deferring payments, please contact us anytime.
Let's discuss your financial situation and work together on a plan to get you through this!
Rebecca Harrap & Wendy WhitingEXPERT FINANCING
CONTACT US
RECENT POSTS
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. This decision comes against a backdrop of significant global uncertainty — and for Canadian homeowners, buyers, and anyone with a mortgage coming up for renewal, here's what it means.
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.
