Mortgage assistance for borrowers affected by the coronavirus outbreak
Many Canadian mortgage holders are understandably worried about meeting their repayments during the COVID-19 pandemic. Find out how to defer mortgage payments.
What's in this guide?
- What is a mortgage deferral period?
- Which lenders are offering options to defer mortgage payments?
- How do I get a mortgage deferral or mortgage assistance?
- How to contact banks offering mortgage deferrals
- What do I do if I can’t get my mortgage payments deferred or mortgage assistance?
- What if my bank branch is closed?
- What if I have a concern or problem with my bank?
Making monthly mortgage repayments is unsurprisingly a top concern for many Canadian homeowners right now, given the widespread disruption and infection risk resulting from the coronavirus (COVID-19) outbreak.
Initially, homeowners worried about how repayments could be met if their lenders’ businesses were interrupted for a while due to the spread of COVID-19 and the call for isolation.
However, with the latest government guidance now advising against commuting, international travel and social interactions at restaurants, pubs and theatres, employed people across many different parts of the economy will now also be seriously concerned about their sources of income and whether they’ll be able to keep a roof over their heads.
What is a mortgage deferral period?
A mortgage deferral period allows you to temporarily stop or reduce your usual monthly mortgage payments for a period of time as agreed with your lender.
Important to note, this is not mortgage forgiveness, which gets rid of debt so you don’t have to pay it. Rather, you could be eligible to be free from making payments for a limited time while you financially recover. After that time period ends, you will resume paying down your mortgage. Interest may continue to accrue on your mortgage during the deferral period, adding to the total amount you’ll end up repaying.
Not all mortgage providers would automatically allow you to defer mortgage payments. Plus, you may be end up being held to terms and conditions in your mortgage agreement that protect lenders from having to make such arrangements. However, in these uncertain times, some of Canada’s biggest banks are making exceptions to their usual policies and are working with those whose incomes have been impact by coronavirus.
Which lenders are offering options to defer mortgage payments?
On March 17, 2020, financial officials from the Canadian government confirmed that they had been in direct contact with representatives from some of the nation’s biggest banks who assured them that they will be flexible in light of the effect the outbreak has had on the incomes of many.
The following banks have confirmed their intention to assist both people and small businesses affected by coronavirus:
- National Bank of Canada
- TD Canada Trust
- Manulife Bank
You could end up getting your mortgage payments deferred for up to 6 months. Additional credit relief may also be available when necessary.
Requests will be evaluated on a case-by-case basis, taking into account people’s individual circumstances and solutions that will best suit their needs. If coronavirus has made it difficult for you to make payments to your bank, speak to a bank representative to find out what options may be available to you.
How do I get a mortgage deferral or mortgage assistance?
The key thing to remember here is that only customers who are experiencing financial difficulties as a direct result of coronavirus will qualify for a deferral of their mortgage payments. Keeping track of documents, notices, pay stubs and other helpful documents showing the impact the virus has had on your income will be helpful.
It might also be useful to get a letter from your employer explaining any measures being taken that could hurt your income (through no fault of your own).
Mortgagees could be facing financial difficulties for a number of reasons, such as:
- Catching the illness itself and being unable to work
- Being required to stay in isolation or quarantine and not being able to work
- Losing their jobs or experiencing a reduction in work hours, because their employers are facing financial trouble as part of the fallout from outbreak
- Being a business owner who is losing income as a result of the economic impact of the virus
As this is a unique and fast-moving situation, it is not yet clear what exact evidence you will be required to submit to your mortgage lender in order to qualify to defer mortgage payments. So, if you feel you qualify, contact your mortgage provider as soon as possible to find out what documentation you need.
How to contact banks offering mortgage deferrals
|Bank||Phone||How to request financial relief||Find a branch|
National Bank of Canada
What do I do if I can’t get my mortgage payments deferred or mortgage assistance?
While you may not qualify to defer mortgage payments, you may be able to qualify for smaller forms of financing to help support your income.
Refinance your mortgage
Similar to debt consolidation, refinancing your mortgage means using a new loan to swallow up your existing mortgage, so you can hopefully pay off your debt with better rates and terms. Homeowners typically start looking into refinancing their mortgages if they can find a new loan where the interest rate is at least 0.5-1% lower than the rate they’re currently paying.
This seemingly straightforward answer isn’t always the best strategy, however. There are several other important factors to consider – like whether or not your current lender will charge an early repayment fee for discharging your mortgage ahead of schedule.
Access government support
The Canadian government has made additional funding available to help people who have contracted coronavirus and those whose income has been affected by the economic downturn. Support includes Employment Insurance (with priority for those who are ill) and the new Canada Emergency Response Benefit for workers who don’t qualify for EI and don’t have paid sick leave as well as other benefits.
Consolidate your debt
Debt consolidation is when you take out a new loan to pay off old debts – ideally, the new loan comes with a lower interest rate and/or better repayment terms, so you can pay down your debt faster. A number of lenders specialize in offering debt consolidation loans, and you may even qualify if your credit score is less-than-stellar.
Get a personal loan
The Canadian government has agreed to buy up to $50 billion in uninsured mortgages, which removes a chunk of the risk of lending off of small lenders’ shoulders. Additionally, the Office of the Superintendent of Financial Institutions (OSFI) has lowered the Domestic Stability Buffer to just 1.00%* of total risk-weighted assets – this means that the government is allowing banks to make riskier loan decisions so that more people and businesses can qualify for financing.
If you haven’t lost your job, but think you may be unemployed in the near future, now may be a good time to apply for a personal loan to tide you through.
Take out a home equity line of credit (HELOC)
You can borrow against existing equity in your home with a home equity line of credit. Your property is used as collateral for the line of credit, so, if you don’t pay back the amount you borrow, the lender can repossess or sell your property.
In Canada, you can borrow up to 65% of the value of your home with a HELOC. And the total amount borrowed against your home (mortgage and HELOC) cannot equal more than 80% of your home’s value. So, if you have $320,000 left on a $400,000.00 home, you already owe 80% of your home’s value and can’t borrow against it anymore until you’ve paid it down. But, if you owe $240,000 on a $400,000 home – which is only 60% of its value – you could potentially qualify to borrow up to $80,000 more (20% of the home’s value).
What if my bank branch is closed?
Many banks are reducing their hours or temporarily shutting down branches altogether to prevent the spread of the disease. To speak to a representative about options to defer mortgage payments, phone or email your bank’s customer service team.
Most financial institutions are increasing the capacity of their call centres to handle the added influx of customer service requests. Remember, many everyday banking functions can still be carried out through online banking and by accessing your bank’s ATMs.
What if I have a concern or problem with my bank?
If you have a complaint regarding your bank, contact the branch manager first to discuss the issue. If the problem persists, contact the Financial Consumer Agency of Canada (FCAC), which holds federally-regulated financial institutions (like banks) accountable with regards to consumer protection measures.
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