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With the continued spread of COVID-19, many Canadians are being asked to shut the doors to their businesses, leaving not only themselves in financial uncertainty, but also the employees who work for them. Many people are getting laid off, and many business owners are seeing a sudden drop in revenue. Even landlords who depend on their tenants to submit timely rent every month are concerned that their renters will not be able to pay up on the first of next month, leaving them to pay their mortgage without any rent to support it.

All these situations are leaving millions of Canadians struggling to keep up with their bills, including their mortgages. Money isn’t flowing in the way it typically does for many. And if you find yourself in this situation, you may be wondering what can be done to help make sure your home is safe even if you don’t have the finances to cover your mortgage payments in full every month.

The good news is that a mortgage deferral program is on the table, which may help with your bills. 

How Is The Government Helping Canadians With Their Mortgage?

Many Canadian households live paycheck to paycheck, which means if income stops all of a sudden, many would not be able to pay their mortgage the following month.

But Canadians need not worry about the possibility of losing their homes in these unprecedented times. The federal government has recently implemented financial assistance programs to help Canadians who may be struggling financially as a result of COVID-19. Trudeau’s government recently announced that it would boost emergency COVID-19 aid to those who need it. 

Anyone who is now unemployed or unable to work because of the coronavirus can take advantage of emergency care and emergency support benefits which have been combined into the Canada Emergency Response Benefit (CERB). This financial aid will provide $2,000 a month for 4 months for anyone who is losing their income because of the virus.

How The Big 6 Banks Are Helping Canadian Homeowners

In addition to the government stepping in to help out financially, many businesses themselves are doing what they can as well, including big banks. This past week, the six big banks in Canada announced a “mortgage deferral” program that would allow borrowers to put off paying their mortgages for six months. 

The banks involved in the program include:

  • Bank of Montreal
  • CIBC
  • National Bank of Canada
  • RBC Royal Bank
  • Scotiabank
  • TD Bank 

These banks will be working with each individual and business on a case-by-case basis to offer solutions to provide some relief of mortgage payment obligations. The program includes up to a six-month mortgage payment deferral, as well as relief on other credit products.

Clients are encouraged to speak to an associate with their bank directly to determine how the mortgage deferral program may be able to help them. 

Not only are big banks taking part in this program, but other non-bank lenders are following in their footsteps to do what they can to help out. Different lenders will have their own individual deferral processes. Plus, many lenders tend to offer things such as the option to skip a month in payments, which can also be helpful. 

What Is A Mortgage Deferral?

A mortgage deferral is a temporary halt on mortgage payments in an effort to provide relief for homeowners who are financially strapped. That said, it does not mean that your mortgage payments are waived, as they will eventually need to be paid at some point later on in the near future. Instead, it just gives borrowers some temporary breathing room when finances are tight. 

Mortgage deferrals are meant to help borrowers avoid missing mortgage payments on paper so they are not penalized for not making them. Missing a mortgage payment can put a ding in your credit score and even risk you losing your home through mortgage default. Mortgage deferrals are meant to avoid this. 

Having said that, the current mortgage deferral options provided by lenders does not mean that everyone holding a mortgage should apply. Instead, this program is meant to help people who actually need financial help. Anyone who is still able to keep up with their mortgage payments should do so. Mortgage deferrals in the face of the COVID-19 pandemic are meant to help those who have lost their job or are unable to work because of the virus. 

Which Lenders Are Offering Mortgage Deferrals?

As mentioned above, the big 6 banks in Canada are offering mortgage deferrals. But if you have a mortgage with another lender, it’s important that you get in contact with them right away to discuss your options. As also noted, many other lenders aside from the big 6 are offering their own form of mortgage deferrals, we encourage you to speak with your lender to see what is offered if you are in need of some financial relief from your mortgage payments.  

Does Your Mortgage Have Built-In Features That Can Help During Times Of Financial Strain?

The current state of the world is certainly a unique one that is putting incredible financial strain on many people. That’s exactly why many lenders are offering their own services to help in some way, and that’s where mortgage deferrals come into the picture. 

But many mortgage contracts may already come with their own built-in features that may be helpful in times of financial crises and may allow borrowers to skip a payment without penalty. For instance, many lenders allow borrowers to skip mortgage payments during times of financial hardships. These features can typically be used only once every year, and a history of timely payments is usually a requirement. 

It’s important to note that interest will continue to accrue during the skipped month, and the payment will eventually need to be paid at some point to make up for the deferral. You will also still have to contribute to your property taxes and property insurance during this time. Check with your lender to get more detailed information on your specific deferral options.

Frequently Asked Questions

How do I find out if I qualify for mortgage relief?

As mentioned earlier, lenders are working with their clients on a case-by-case basis. Your best bet is to call your lender directly to discuss your situation and determine if a mortgage deferral is available to you to help provide some relief from financial hardship as a result of COVID-19. You will need to answer a few questions to prove financial hardship. 

Do I have to request a mortgage deferral within a certain time frame?

Mortgage deferrals are available at any time that you are going through financial difficulty.

Will interest still accrue?

While the idea of being able to skip mortgage payments by up to 6 months sounds great, there are still some unanswered questions surrounding the interest portion of the payments. In some cases, the principal portion may be postponed, but the interest portion would still be due. And for those who are still very early in their mortgages, the interest portion can be much larger compared to the principal amount.  Borrowers would be able to pay less right now, but more would actually be owed over the life of the loan by participating in a mortgage deferral.  Borrowers are encouraged to get the details of mortgage deferrals from their banks to see what the exact set-up is like and whether or not it may be in their best interests to take part in this program if interest will still accrue.

Will deferring a mortgage payment hurt my credit score?

No, taking advantage of a lender approved mortgage payment deferral will not show up on your credit report as a missed payment and therefore, will not hurt your credit score.

Can I ask for a mortgage payment deferral even if I didn’t get laid off?

No, mortgage deferrals are meant only for those borrowers who are experiencing serious financial issues. Lenders will require you to prove real financial hardship in order to qualify for a mortgage deferral.

Final Thoughts

It’s almost surreal to think about how many millions of people are affected financially by COVID-19, not to mention the health implications of the virus. Many people are in immediate need of financial relief, as bills are always coming due. For those who are unable to work because of COVID-19, the government and banks are stepping in to help, including offering options to defer mortgage payments. If you think this is something that could help you, contact your lender directly to discuss your options.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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