I chose to take a mortgage deferral early in the pandemic. My deferral period is almost done, and I’m still not back to work. What are my options? – RUNNING SHORT
DEAR RUNNING: COVID-19 measures have left many homeowners unemployed or reduced their hours to a point where they worry about making mortgage payments.
Early in the pandemic, the Canada Housing and Mortgage Corporation (CMHC) allowed lenders to offer six-month deferrals on insured mortgages. A deferral is an agreement between a mortgage holder and their bank which allows payments to be put on hold for a set amount of time. These temporary measures were meant to reduce pressure on homeowners, but referral deadlines are now coming due in the shadow of a second wave.
This unfortunate convergence raises two key concerns. The first and most pressing is whether mortgage holders will be able to make their monthly payments once the deferrals expire. The second is whether those who are not able to pay will be able to find a work-around solution.
Many people have been receiving the CERB (or other benefits) over the course of the pandemic. If these funds, your savings, or any other income will allow you to keep making your mortgage payments, the bank won’t be concerned about whether you are working or not.
If you are unable to resume payments, it’s critical that you speak to your financial institution immediately. As I’ve mentioned before, you can keep a problem more manageable by tackling it early on, as opposed to applying the ostrich principle (where you stick head in sand and hope it goes away).
Deferral concerns will be increasingly common as the pandemic drags on, and each bank will deal with them in their own way. I reached out to RBC Royal Bank for some feedback, where Dave Mota (Manager, Mortgage Solutions) confirmed that RBC is considering their deferral scenarios on case-by-case basis, rather than choosing to apply a blanket solution. Depending on the situation, options for mortgage holders may include refinancing, interest rate reductions, fee waivers, debt consolidation, changes to loan amortization, or even full credit restructuring.
PRO TIP: Speak to your lender about where to go from here. You may be able to re-qualify based on adding another family member (like a parent, aunt or uncle), or re-financing with another lender who has more flexibility. As a last resort, you could consider cashing in enough stocks, bonds or RRSPs to get you through the month. Ultimately, mortgage payments must be made to avoid going into default.
Plan ahead, and rely on expert guidance from your mortgage specialist, investment professional, lawyer or Realtor. As you know, my advice is always free. #AskDavid #Advice