Deferring Mortgage Payments. (Covid-19)
DLC Canadian Mortgage Experts • 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!
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