Canada’s biggest banks are responding to the recent outbreak of COVID-19 by rolling out mortgage deferral programs. Let’s break it down and understand this new program that is being introduced by the banks.
What is mortgage payment deferral?
Mortgage payment deferrals can help you during times of financial hardship – like unemployment or reduced employment due to the COVID-19 outbreak. The deferral is an agreement between you and your lender. 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 must be repaid.
How do I know if I am eligible for a mortgage payment deferral?
Your lender, bank or mortgage professional can tell you if you are eligible for this program.
How much am I really paying?
After the agreement ends, your mortgage payments return to normal and the missed payments must be repaid. During this process of deferring your mortgage, you accumulate added interest costs. 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.
What are my options?
If you are in a position to be able to pay your mortgage payment, then you should. Although your mortgage payment can be deferred, you accumulate added interest costs that you should only consider doing if you are not able to pay your mortgage payment.
For any more information regarding this new mortgage payment deferral program, don’t hesitate to reach out, I’d be more than happy to be of any assistance during this time.