Mortgage payment deferrals can help homeowners that have been left without a job or with reduced hours during times of financial hardship. Homeowners facing financial stress may be eligible for a mortgage payment deferral of up to 6 months to help ease the financial burden.
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A mortgage deferral helps you when you are struggling to make your payments by allowing you to skip your mortgage payment for a specified amount of time. It’s important to understand that the mortgage deferral agreement you arrange with your lender does not cancel, erase or eliminate the amount owed on your mortgage. At the end of the agreement, you will have to resume payments according to your regular payment schedule.
Mortgage insurers – Canada Mortgage and Housing Corp (CMHC), Genworth, and Canada Guaranty – have joined with lenders to announce that eligible clients can delay mortgage payments. These are “compassionate” programs for homeowners who are in serious financial straits and are unable to make their mortgage payments for a period of time. You will need to apply to the program, and assistance will be determined on a case-by-case basis – so please do not start skipping payments until you speak with your lender first. If you urgently need this kind of help, get in touch, and our Benchmark team can help you find the right contact information to apply. Please be advised that most lenders have been swamped with calls and emails, so you may need some patience to get through this process. Below are additional details to help with your understanding of a deferral along with is a list of the lenders’ contact details for you to discuss your options further:
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What is mortgage payment deferral? Mortgage payment deferrals can help you during times of financial hardship—like unemployment or reduced employment due to the Coronavirus (COVID-19) outbreak. The deferral is an agreement between you and your lender (your bank or your mortgage professional). Typically, the agreement indicates that you and your lender have agreed to pause or suspend your mortgage payments for a certain amount of time. It’s also known as a mortgage payment deferral agreement or mortgage forbearance agreement and it’s a temporary measure. After the agreement ends, your mortgage payments return to normal and the missed payments – including principal and accumulated interest – repaid.
How mortgage payment deferrals can help you? A mortgage deferral helps you when you’re struggling to make your payments by allowing you to skip your mortgage payment for a specified amount of time.
Are the deferred payments erased or cancelled? The mortgage deferral agreement does not cancel, erase or eliminate the amount owed on your mortgage. At the end of the agreement, you will have to resume payment according to your regular payment schedule. NOTE: The interest that hasn’t been paid during the deferral period continues to be added to the outstanding principal of your mortgage. This can affect the total amount you owe in accordance with the original payment schedule.
Do I need to repay the deferred amounts? Yes, you’ll need to repay the amounts of the skipped payments including both principal and interest.
How do I repay the deferred amounts? Details of the repayment will vary according to the specific lender and situation. Your mortgage payment may be adjusted to reflect the increased outstanding mortgage amount. This happens immediately following the deferral period or at the time you renew your interest rate term. The interest on your mortgage that hasn’t been paid during the deferral period continues to be added to the outstanding principal of your mortgage. When your payments start again, your mortgage payment may then be based off the total amount you then owe to pay off your mortgage in accordance with the original payment schedule. IMPORTANT: Mortgage payment deferrals focus solely on your mortgage. It won’t affect other payments regularly withdrawn, like property taxes and life/disability insurance.
How do I know if I am eligible for a mortgage payment deferral? Your lender can tell you if you are eligible for a mortgage payment deferral.
What if my mortgage isn’t CMHC, Genworth or Canada Guaranty-insured? Any borrower facing financial difficulty should contact their lender to learn what options are available.
Will a mortgage payment deferral affect my credit? Equifax (a registered Canadian Credit Bureau agency) recently announced, “In the event that a [lender] makes a credit relief or payment deferral program available to its consumers to opt out of making monthly payments during the pandemic, Equifax’s expectation is that the [lender] would take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus that is misaligned with the program it has implemented.”
What are my options? Mortgage payment deferrals are for people who NEED them – those who will struggle to make their next mortgage payment. If you are in a position to make your payments, you should. If—at any point in this crisis—you think you won’t be able to make your regular mortgage payment, it’s important for you to take quick action. Contact your lender immediately before you miss a payment.
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Reference: Canadian Bankers Association