Covid-19 has impacted our economy and financial markets significantly. The government has implemented a mortgage deferral program to help those in need of financial support during this time. A person can now defer his or her mortgage payment for up to 6 months, at the lender’s discretion.
There are some important details you should know before signing up to have your payments deferred. These include interest being charged, how it affects your credit rating, how it will change your payments after the deferral period is over and what happens if your lender pays your property taxes with your mortgage payment. If you are a landlord, what happens if your tenant cannot pay rent but you still have to make a mortgage payment?
When a payment is deferred, the interest is still being charged, however it will be added to the balance of the mortgage once the payment deferral period is over. It varies from lender to lender in what time period that interest will have to be paid back. Some lenders will charge it over the rest of your term, and some may amortize it over the life of the mortgage. This difference impacts how much your payment will go up once you get back to making payments again. Check with your lender and ask how the interest gets repaid – over the term or over the amortization. The deferral costs you more in interest in the long run but provides major financial relief for the short term.
Your credit rating will not be impacted by this specific mortgage deferral program. In a normal circumstance if you skip a payment (without having made prepayments), or if you miss a payment altogether, the lender will report a late payment to the credit bureau which will reduce your credit score and reflect poorly for any future borrowing. This program is designed for the lenders to not report any late payments. Keep track of all documents, customer service reps you speak to and the date and time of the approval for the deferral program just in case. Better to be safe than sorry!
Your property taxes are separate from your mortgage payment. Some lenders add the monthly property tax amount onto the principal and interest being charged and pay the property taxes on your behalf when they are due. The mortgage deferral program is designed for your principle and interest to be deferred – not your property taxes. The lender may continue to draw the property tax portion from your account so you are not short funds when property taxes are due. Check with your lender if you’re unsure if they collect the property taxes for you and if they will continue to draw the property tax portion from your account.
What happens if a tenant or business cannot pay his or her rent or lease? What options do you have as a landlord? This program applies to residential rentals owned and commercial property. Lenders providing residential rental and commercial mortgages are offering deferrals as well. Even if you are not personally financially impacted yet, your tenants might be – especially if they have been told to shut the doors of their businesses or have been laid off. This program could help you keep a great tenant in place, while not having to cover the cost of the mortgage payment if they cannot pay his/her rent due to financial hardship.
If you have been financially impacted by Covid-19 and think deferring your mortgage payment is a good option, please contact your lender directly to make payment deferral arrangements or call me with any questions you may have.
Here is a list of lenders and phone numbers, along with emails for those who have an email contact option. Be prepared to be placed on hold for 1-3 hours as this is an unprecedented time for lenders and the world.
|Alta West Mortgagefirstname.lastname@example.org|
|Marathon Mortgage Corp||1-855-503-6060||n/a|
|TD Canada Trust||1-866-222-3456||n/a|
|VWR Captital Corpemail@example.com|