Mortgage Deferral Options
Making sense of a changing marketplace
Let me begin with my heartfelt hope that you and your loved ones are in good health.
We are in uncharted territory with a marketplace that is continually shifting. I have been receiving many phone calls asking about how might affect you. So I have consulted one of my trusted mortgage partners, Denise Grimes of Mortgage Intelligence and together we have put together some information one your most asked questions.
FOR CURRENT HOMEOWNERS
What do the mortgage payment deferrals mean and how do I access that?
Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. These are “compassionate” programs for those who are in serious financial straits and unable to make their mortgage payments. You will need to apply to the program, and assistance will be determined on a case-by-case basis so please do not just start skipping payments. If you urgently need this help, get in touch. Please do remember when you defer a payment you will have to make up a portion of the payment in the future making your future payments larger, and the interest will continue on the payments you “tacked back on” to the back end of your mortgage. Deferral payments are not a great financial option long term unless you really need it.
lf you do call to defer, Denise suggests having your mortgage number available and to also pack some patience when you call as we hear that there are long phone waits. If you are trying to find your mortgage number, check your 2019 mortgage statement, which you should have received from the bank by the end of February. Your statement will have your mortgage number and other information about your existing mortgage as well as bank numbers to contact if your bank is not on the list below.
Will the lower Bank of Canada rate help me with my variable mortgage or line of credit?
Yes, your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your rate won’t necessarily move in lockstep with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in defaults. If you do have a deep discounted variable rate mortgage, you are in a very good position.
What about my fixed-rate mortgage?
If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to renegotiate your mortgage to take advantage of today’s rates.
I have some credit-card and/or loan debt that now has me worried.
If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.
Will the Stree Test Changes recently announced still Go Into effect?
The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th.
What does our crystal ball say about rate changes?
While rates initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime at the time this was typed (4/1/20).
What future does the future hold for the marketplace?
While no one knows for certain what the future will hold, one thing we do know is that real estate stimulus has often provided a boost to many sectors of the economy such as construction, speculation, home renovation, and banking to name only a few. It’s my opinion that we will see some policy stimulus inject into the real estate industry in the not too distant future. One idea that has been discussed by real estate leaders and lobbyists has been the idea of temporarily suspending the land transfer tax. For me, this option certainly leads to more questions than answers and is purely political talk at this time. I will certainly keep you updated on this site of any upcoming policy changes or any other information I think may be important to you.
Please stay well and don’t hesitate with any questions.