When the big banks in Canada said they would assist homeowners through the COVID-19 crisis with their mortgages in the form of deferrals, it sounded like a great option, but you may want to think twice and here’s why.
What Exactly is a Mortgage Deferral
According to the Canadian Bankers Association’s website : Customers should understand that this is not mortgage forgiveness. 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. The added interest is incorporated into the monthly payment, either when payments resume at the end of the deferral period or upon renewal at the end of the mortgage’s term.
Expert Weighs In
Samantha Brookes, the CEO of Mortgages of Canada, said it’s a good idea if needed, but anyone eligible for the program will still be responsible for added interest, fees and deferral charges.
“If you lost your job and there is no way you could actually make that mortgage payment than they 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 than they are not going to give you that deferral,” she said.
Brookes said that any interest you don’t pay, you’ll have to pay eventually along with other fees and charges. She also added: “If you don’t do a refinance on renewal your payments will be higher. The only people who are really going to win obviously will be the banks.”
Before signing up for mortgage deferral, she said 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.
Brookes said her best advice if someone has no other option is to call their bank about mortgage deferral, they should also consider another financial strategy to get them through COVID-19.
Banks are encouraging customers to visit their websites for the latest information, rather than calling or visiting a branch according the CBA website.
For more information on bank contact information visit the link HERE.
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