What to Know When A Mortgage Payment Deferral is Needed
Posted By: Rachel Kavanagh
April 2, 2020
What to Know When A Mortgage Payment Deferral is Needed – The COVID-19 pandemic has impacted everyone and has unfortunately left many homeowners either without a job or with reduced hours. During this time of unprecedented financial uncertainty, Canada’s largest banks (TD, Scotiabank, National Bank, CIBC, RBC, BMO) are offering mortgage payment relief to customers through deferred mortgage payments. As of March 27, more than 213,000 requests for mortgage deferrals have been completed or are still being processed. Many lenders are offering eligible homeowners who are facing financial stress the ability to defer their mortgage payments for up to six months.
First, it is important to understand what a mortgage payment deferral is. A deferral is an agreement that is made between you and your lender to pause or suspend a payment for some time. Typically, a mortgage payment deferral is used during times of financial hardship. Some people incorrectly interpret a mortgage deferral as an option for payments to be eliminated, erased or cancelled. Actually, at the end of the agreement, the mortgage payments will continue and the missed payments (including principal and interest) will be paid in full.
We did some research with each of the six major banks who are offering relief during this time. It is important to contact them as soon as possible if you think you will need this option. Customers will need to answer a few questions to submit their applications. There is presently no deadline for applying for relief and a homeowner can apply with their bank if and when the need arises.
Here is a brief breakdown of what each bank is currently doing:
Bank of Montreal (BMO) – www.bmo.com/main/personal/bmo-branches-coronavirus-update
BMO has introduced a financial relief program for those impacted by COVID-19. They have flexible financial relief options available for personal and business banking customers. To help with immediate relief, BMO is offering payment deferrals of up to 6 months on loans, cards, and lines of credit with no fee (the payment will be deferred but interest will continue to accrue) and no changes to the terms of the account.
Canadian Imperial Bank of Commerce (CIBC) – www.cibc.com/en/personal-banking/advice-centre/covid-19.html
CIBC is offering individuals who are facing a pay disruption or another financial issue due to COVID-19 a 6-month payment deferral. Qualifying products include mortgages, personal loans, credit cards and lines of credit. Customers can request more time to make a payment (the payment will be deferred, and interest and fees will continue to accumulate on the outstanding balance).
National Bank of Canada – www.nbc.ca/personal/notice.html
The National Bank of Canada is allowing eligible customers the ability to defer the mortgage payments due to COVID-19 for up to 6 months. Deferring a mortgage payment allows the customer to postpone their next payment (principal and interest) until the end of the requested term.
However, if the decision is made to defer a mortgage payment. The customer must continue to pay administration fees, insurance, and municipal and school taxes.
Scotiabank – www.scotiabank.com/ca/en/personal/scotia-support/latest-updates.html
Mortgage payment deferrals are available for Scotiabank customers experiencing financial hardship due to COVID-19. A mortgage payment deferral means that the customer will not be required to make regular payments on their mortgage (principal, interest, and property taxes, if applicable) for 6 months.
During the time the mortgage payments are deferred, interest will continue to accrue and will be added to the mortgage account balance at the end of the deferral period. This means the payments will be slightly higher after the deferral period ends. More will be paid in interest over the life of the mortgage, but a deferral will also help with short-term cash flow.
No credit check will be required and this will not impact the customer’s credit score.
Royal Bank of Canada (RBC) – www.rbc.com/covid-19
RBC has put in place financial relief programs for personal and business clients who have experienced financial hardship as a result of the COVID-19 outbreak. RBC is offering two options for financial relief:
Immediate Relief: One-month relief from mortgages, car loans, personal loans or credit cards
Longer-Term Relief: Up to six months of mortgage payment relief
Toronto Dominion Bank (TD) – www.td.com/ca/en/personal-banking/covid-19
TD is offering its customers who are experiencing financial hardship, the ability to defer the equivalent of up to 6 monthly mortgage payments. By deferring payments, the mortgage principal is not being paid, and interest will be capitalized (i.e. added to the outstanding mortgage balance so the balance will increase).
Should you require any financial assistance during this time, our team is available to answer any of your questions or put you in contact with one of our many mortgage representatives. Please let us know how we can help.
What to Know When A Mortgage Payment Deferral is Needed written by Benczik Team Realty.