Since the banks announced that homeowners struggling in the COVID-19 pandemic could defer mortgage payments for up to six months, more than a million Canadians are reported to have tried to take up the offer.<\/p>\n
But with phone lines jammed, and websites unable to process applications that are assessed on a case-by-case basis, many homeowners looking for a deferral or seeking answers have had little success.<\/p>\n
Confusion reigns over what makes a homeowner eligible for an emergency deferral, how the program works, whether interest is payable and whether deferring payments will affect credit scores. Unfortunately, with the situation changing on a daily basis, and lenders forced to make up rules as they go, it has been impossible for most people to get any information.<\/p>\n
To clear up some of these issues, Glacier Media Real Estate spoke with five mortgage experts who offered their insights and advice on some frequently asked questions.<\/p>\n
Would deferring my mortgage payments damage my credit score?<\/strong><\/p>\n As long as the proper arrangements are made in advance, your credit score should not be affected. Atrina Kouroshnia, mortgage broker with Dominion Lending Centres, says, \u201cI don’t think deferring payments will have the same impact as [it did] before, as it’s a global [pandemic] and, especially if your job is affected, you are making a proactive choice.\u201d<\/p>\n Peter Kinch, best-selling author and award-winning mortgage broker, agrees, \u201cI do not see a situation wherein this will have any impact on your credit score.\u201d<\/p>\n The number-one most important thing? Never assume that you\u2019ll be able to get the deferral and simply not pay your mortgage when it\u2019s due, as this will damage your credit score. \u201cThe worst thing would be to just skip your payments,\u201d warns Kouroshnia.<\/p>\n Angela Calla, also with Dominion Lending Centres, cautions, \u201cIf you miss the payment without an agreement or your lender does not approve you, it can impact your credit score and could significantly increase your cost of borrowing at renewal. Each borrower should confirm with the lender before they agree to the deferral.\u201d<\/p>\n How can I get through to my lender?<\/strong><\/p>\n For those trying to make such arrangements but having trouble getting through, Calla says it\u2019s important to give the banks time. \u201cUnless you have a payment due in the next five days [that you can\u2019t pay], they ask that you delay calling at this time [due to overwhelming call volumes]. Email is preferred, or some lenders have portals they have created to assist with this. Look at your lender\u2019s website for updates.\u201d<\/p>\n Alisa Aragon, also with Dominion Lending Centres, recommends speaking first to your mortgage broker, if you have one. \u201cLenders are experiencing an overwhelming amount of calls and it is very hard to get through. If people have questions, it is best that they talk to their mortgage expert, as we are getting information from most lenders and we might be able to answer their questions faster.\u201d<\/p>\n Should I apply, and would I be approved, for a deferral?<\/strong><\/p>\n Once you\u2019ve managed to get through to your lender, you\u2019ll likely only be approved for a payment deferral if you\u2019ve lost income due to the COVID-19 pandemic, say the brokers.<\/p>\n If you\u2019re still working and can afford your mortgage, don\u2019t attempt to get a deferral. Not only will you likely be wasting your time and that of the overstretched lenders, the program should only be used as an emergency last resort. That\u2019s because deferring payments will cost you more money in the long term (see \u201cHow would a mortgage payment deferral work?\u201d below).<\/p>\n Only those truly unable to pay their mortgage right now, due to lost income from the pandemic, should apply. \u201cThe deferral program is really for homeowners that are experiencing financial hardship due to the COVID-19 virus,\u201d says Aragon. \u201cIf you are still employed and earning an income, then lenders will not be assisting those borrowers at this time. This program is for people that really need it.\u201d<\/p>\n For those who feel they meet the requirements, it\u2019s worth applying, and each application will be assessed on a case-by-case basis. \u201cIt also depends on the lender,\u201d adds Aragon. \u201cEach lender has its own requirements on what has to be provided.\u201d<\/p>\n Landlords of rental properties are unlikely to get approved for a deferral, even if their tenants can\u2019t pay rent due to lost income, according to Calla. \u201cDeferrals are not being approved on rentals at this time [March 25],\u201d she says. \u201cIf\/when they are, it will come with additional costs for the landlord, once determined.\u201d<\/p>\n One relief for landlords is that tenants unable to pay rent due to lost income can now apply for the new $500-a-month rent supplement, to be paid directly to their landlord via BC Housing, which was announced March 25.<\/p>\n If I were approved, how would a mortgage payment deferral work?<\/strong><\/p>\n Make no mistake, a mortgage payment deferral is an emergency, temporary measure that will cost you more in the long term, caution the brokers. What\u2019s more, the longer you defer payments, the more it will cost you, as interest will be payable at your contract rate during the deferral period, and will add up.<\/p>\n Kinch explains, \u201cYour principal and interest payments do not have to be made for a period of [up to] six months. However, the banks will accrue your monthly interest payments and add that amount onto your current mortgage balance. As such, after the six-month deferral period, you will have a larger mortgage balance and your monthly payment will be adjusted accordingly to compensate. So you end up with a cash-flow break today, but you\u2019ll have to make up for it in six months. To be clear \u2013 this is a \u2018deferral\u2019 not a \u2018loan holiday\u2019.\u201d<\/p>\n Kinch\u2019s colleague Jonathan Barlow adds, \u201cEvery lender will be different in how they manage it. Ones with deep pockets may allow for the deferral to continue until renewal, when they simply renew with the higher balance. Others may structure a repayment plan. Again, this is untrodden ground for the lenders, so they will all approach it differently.\u201d<\/p>\n Calla says, \u201cYou are responsible to pay the deferral [interest] taken on the remaining payments on the term with most lenders. This is why it\u2019s approved only for those who can\u2019t make a payment due to not having the financial means. Everyone\u2019s amounts per month and total interest cost will be different based on mortgage amount, rate and term remaining.\u201d<\/p>\n What if my mortgage is with a monoline lender?<\/strong><\/p>\n The Big Six Canadian banks, plus some credit unions such as Vancity, have been vocal about offering their mortgage payment deferral programs to those in need. But many Canadian homeowners have their mortgages with alternative specialist mortgage lenders, also known as monoline lenders. So are they offering the same payment deferral program?<\/p>\n Barlow says, \u201cMonolines are supporting the deferral program as well, but because they are single service providers (mortgages only), their monetary base is much smaller. So they will be much more strategic about who they offer it to. They\u2019ll certainly ask more questions, but you\u2019ll likely get a much better plan and collaboration from them.\u201d<\/p>\n As with all mortgage types, for more information about deferring payments, go to your lender\u2019s website and talk to your mortgage broker before braving the long hold times on the customer service lines.<\/p>\n