Deferring Your Mortgage: What It Means and How COVID-19 Affects Deferrals
Since the announcement from the World Health Organization that COVID-19 is officially considered a global pandemic, the Canadian and global economy has entered some uncertain times.
While the Canadian Government has been working on ensuring some type of economic stability for all Canadians in the upcoming months, the forceful shutdown of all non-essential businesses can have a significant effect not only on the entire economy but also on your wallet and make it tough to make the bill payments.
If you are worried about being able to pay your mortgage in the upcoming weeks or months there are fortunately some tools that mortgage brokers can help you with to manage your payments. Specifically, you may be eligible to defer your mortgage payment. But what does that even mean?
What Is A Deferred Mortgage Payment?
Mortgage deferral means that payments are skipped for a defined period of time, during which interest charges that would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage. So, while you are not making payments, interest is continuing to accrue, which means your payments afterwards will be slightly higher, or your principal due at maturity will be higher than scheduled. If you’re unsure which option works best for your budget, click here to speak to one of our experts.
How it Works
As far as the coronavirus pandemic goes, a borrower must be in quarantine due to potentially having coronavirus or been laid off from their employer because of coronavirus concerns. However, because of this unprecedented situation, lenders are overwhelmed with requests that may take longer than expected to approve deferrals.
Is A Deferral Right For You?
Deferrals, sometimes called “payment vacations” are there to help you when you need them. A deferral is typically an option for those who find themselves suddenly unemployed or in another type of unexpected financial downfall, so it only makes sense to take advantage of this option during a global pandemic. As the Canadian government predicts up to 25% of small businesses will not be able to recover from this financial burden, this may be a good time to speak to your lender about a deferral until your company can reopen its doors.
A deferral will ultimately mean you end up paying more to your mortgage later on, so it is important to sit down with your lender to calculate what deferral option is right for you. However, it is important to note that a mortgage deferral doesn’t have a negative impact on your credit score.
Do you have questions about how to navigate a mortgage deferral? Contact our team today!