When Canada’s big banks said they would allow homeowners to defer their mortgage payments for up to six months during the Covid-19 pandemic it seemed like a great idea, but a mortgage expert says few will qualify.
It is a great idea if needed, but anyone eligible for the program will have to use it as a last resort and will need to keep in mind they are will still be responsible for added interest, fees and deferral charges.
For example, If you loose your job and there is no way to make your mortgage payment then the banks will look to give you an approval on that deferral, but if you have assets or you have any other savings anywhere else to make those mortgage payments with then they are not going to give you a deferral.
Canada’s six largest banks are taking part in the program, but the Canadian Bankers Association saw fit to issue a news release to make sure Canadians know exactly what the program is offering.
Home owners should understand this is not mortgage payment forgiveness, the release states.
“Mortgage deferral means that payments are skipped for a defined period of time, during which interest which would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage.”
In other words, any interest you don’t pay now, you’ll have to pay eventually along with other fees and charges. It will accumulate and go on the back end of the mortgage.
If use the program and you don’t do a refinance at the end of your mortgage term, up on the mortgage renewal your payments will be higher.
Before signing up for mortgage deferral, people should keep in mind that not everyone is eligible and there is a chance it could affect your credit rating. A person also may need to reapply each month.
Before considering the mortgage deferral program, you should consider talking to your financial experts about other strategies that may be better suited to you to get through the pandemic than the mortgage deferral program. But if you do need it, take it.
Steven Porter is a Licensed mortgage agent with Mortgage Architects, mortgage broker. For advice and service contact Steven Porter, Accredited Buyer Representative, Seniors Real Estate Specialist, Certified Luxury Home Mortgage Advisor and Certified Reverse Mortgage Specialist at 905-875-2582, steven@1800Mortgages.ca, www.1800Mortgages.ca