What Happens If Your Mortgage Deferral Period Is About To End?
The three to six month mortgage deferral, used by 760,000 Canadians and $170 billion worth of outstanding mortgage vacations taken from their mortgage payments, will come to an end soon. OSFI, Canada’s banking regulator, announced it will start phasing out special regulatory capital treatment of deferrals given improving economic conditions.
But what happens if your mortgage deferral period is about to end, what are your options?
If you can resume your payments now
When your deferral lapses and/or when you’re ready, resume your regular payment as per your mortgage schedule. Getting back on track reduces the overall interest you’ll pay. Also, you’ll come out of “deferred status” on your credit report which is important as you may not be able access any new credit while in this condition. Be sure to check your personal credit report the next month to make sure this updated correctly. Congrats, you’re back on track!
If you’ll be able to make payments … not quite yet but soon
If there is a small gap between when your payments are set to start and when you’ll have the money for the payment, here are some ideas:
- Contact your lender and ask if they will extend the deferral period for the small time needed.
- If you have a line of credit, borrow from it to make your mortgage payment. Only consider this if you can repay it promptly.
- Can a friend/family member help cover your costs in the interim?
If you deferred payments not because you had to, but to build an emergency fund
A significant share of mortgage deferrals were done by homeowners who, while able to pay, chose to defer to save the mortgage payment to build up an emergency fund. When your deferral lapses and/or when you’re ready, resume your regular payment schedule but leave your emergency account untouched. The current economy has many unknowns and your situation could change rapidly, having an established emergency account may be a blessing in the coming months.
If you cannot resume your payment
If you cannot resume your payment any time soon, unfortunately, it is very unlikely your lender will allow a further deferral. While this is a difficult situation, start exploring options now:
- Do not wait until you’ve missed a payment without speaking to your lender. Make sure you are in contact having an honest conversation about your situation. They may work with you to extend amortization, reduce payment frequency, change mortgage product, etc – they will do what they can to help. When you miss even one payment, you allow a lender to potentially start the foreclosure process.
- File a consumer proposal. With a consumer proposal, homeowners can reduce/amend their non-mortgage debt and very likely keep the home, assuming you can and will keep up with regular mortgage payments.
- List the property for sale. A timely sale will repay the mortgage in advance of the lender proceeding with foreclosure.
Candace Perko
Mortgage Broker
Countryside Financial
www.countrysidefinancial.ca
