Unemployment or reduced employment is a reality for many Canadians right now. Homeowners are struggling to make their payments in this new economic landscape. The federal government, CMHC, and lenders are willing to help borrowers in good standing by deferring their payments for up to six months. If this is an option you are considering for your household, make sure that this deferral program is right for you before applying. In this week’s article, we are going to explore what this program looks like and what it means for Albertans.
Unlike most of the other relief programs out there right now, you do not need to apply on any government website. Mortgage deferrals are an agreement between you and your lender to pause or suspend your monthly mortgage payments for a predetermined amount of time. It is a temporary measure until your income recovers and you can begin to pay again. At this time, you will be expected to repay the principal and accumulated interest.
In the case of a deferral, your mortgage amortization does not increase. Let’s say you have five years left in your mortgage. If you defer your payments for six months, you will need to pay those missed payments, plus the remaining balance within 4.5 years. This often leads to an increase in monthly payments once the deferral period is complete.
Even though you are not responsible for paying each month during the deferral period, interest is still accruing over that time. In some cases, lenders will compound the interest. Increased interest means you will actually be paying more for your mortgage in the long run. That’s why it is so important to review your deferral agreement in great detail so you don’t end up in more financial trouble than you started.
If you are in need of financial assistance, make sure to consider all of your options. You may find that another product like a Home Equity Line of Credit is more beneficial for you. To best suit your needs, make sure you speak with a mortgage professional about your options.
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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