It was only days ago that the Federal Government announced that it would provide increased flexibility to lenders to defer mortgage payments during the COVID-19 crisis. Shortly thereafter, the big 6 banks announced they would be allowing up to 6 months of mortgage payment deferrals to assist those impacted by COVID-19. The monoline lenders followed suit. Since then, they have all been doing as best they can to accommodate the massive volume of calls and emails, while implementing new programs daily to help handle these inquiries. I have been completely immersed in trying to help my clients who are seeking payment relief during these times. Lenders are updating us daily/hourly as to what the best course of actions is.Here is what I know so far:
- Many people are under the impression that the government is offering mortgage payment forgiveness or mortgage compensations of some kind. This is not the case. Any deferred payment will be added to your mortgage in one way or another, with interest. A payment deferral will cost you a lot more in the long run. Keep in mind, this is not a free or government money program.
- I have heard about 2 clients being offered 6 months of deferred payments with no questions asked but please understand that this is not the norm. You will likely be asked about your employment status and other reasons for requesting deferral. Many lenders will ask about your net worth status and liquid assets available. (If you do your regular banking with the same lender that holds your mortgage, they can likely assess this internally). Whether or not your mortgage is default insured, collaterally charged, your loan-to-value ratio, and if you have been set up on accelerated payments or applied any lump sum payments in the past will be considered. Many clients are offered a one-month deferral only and encouraged to re-apply with new status each month. Alberta residents; I’ve had clients in the oil and gas industry asked by the lenders if their layoff was directly due to COVID-19, or other factors. GREAT QUESTION. I believe the answer is circumstantial to your working environment, but I’m trying to find out more.
- Regardless of how urgent your situation is, please contact your lender; missing a payment could damage your credit rating. It is going to take time to get a response and it can be frustrating to be on hold or wait for an e-mail response; please be patient.
- Mortgage distress, like any kind of distress, is relative. For some people, mortgage distress is due to worry about the coming disastrous economic effects of COVID-19 on their job or business. For other people, mortgage distress is being suddenly laid off with no income and unable to pay their Mortgage on Tuesday. Both are valid concerns, however, some lenders are prioritizing and only dealing with those not able to pay their mortgage payment due within the next 7 days. If you don’t have concern about missing your next payment, consider sending an email or filling out a form for a call back later. I know waiting can be frustrating. In these times, exercising a little patience and freeing up the phone lines could help your friends and neighbours keep their home.
- If you believe you have some equity in your home, you might be able to avoid all of this by speaking to a mortgage advisor and setting yourself up to access equity for fallback more affordably. You should do this before there are any negative changes to your income or home value. You may be able to refinance to draw out an emergency fund, set up a home equity credit line, a reverse mortgage, or even private financing to bridge the gap at this time.
- Self employed and commissioned workers: Many lenders require “proof” that you’ve been laid off or impacted by COVID-19. in order to defer payments. For many of you, that is something that you won’t be able to document for months. Please follow up with me to explore your financing options outside of deferred payments.
I hope this information helps!
Debra Carlson, Mortgage Advisor