Mortgage Payments in Canada During COVID-19 for the Immunocompromised: What you Need to Know
Unfortunately, those most at risk of developing severe complications if exposed to COVID-19 are also most at risk of developing financial difficulties during this time. If you’re immunocompromised and had to take leave from a job that is essential or has duties that cannot be performed at home, and are worried about making your mortgage payments, this article is for you.
We are not financial experts; however, we did our best to collect pertinent information on the subject to help our community navigate life during this difficult time. Here you will see what Government, banks, and lenders are doing during this time ease the financial burden for those who have lost their jobs in these unprecedented times.
I’m a Canadian who is immunocompromised and:
- I am worried about paying my rent during the COVID-19 crisis
- I am having a hard time paying my hydro bill
First up, let’s address the elephant in the room- mortgage deferrals. Within your regular mortgage, even outside of states of emergency, you always have the option to defer your mortgage payment. This means you can opt-out of paying your mortgage for one month and add that month’s payment to the end of your mortgage term. Sounds great right?
Be warned: deferring a mortgage payment also means interest will accumulate for as long as that payment is deferred.
To give you an idea how much interest can accumulate if you decide to go this route, check out this example of interest accumulated from a deferred payment provided by RateHub. If you have a mortgage rate of 2.80% and 20 years remaining, a skipped payment of $2,000 will cost you an extra $1,403 over the long-term. That is over HALF the cost of your existing payment. In addition to this, you will still be responsible for property tax and home insurance payments.
So, with that in mind, unless you have no other choice, it might be wise to avoid deferral of payment. Perhaps see where else in your budget you can make cuts before you decide to go this route.
However, if you would like to go this route, keeping the above information in mind, all you need to do is call your mortgage lender and ask them to defer your mortgage for one month. If you are set up with online banking or an online mortgage portal through your lender, you can organize your deferral through their site. There will be instructions on how to do this once you enter their web page or portal.
Extended Mortgage Payment Deferrals:
Some lenders are offering mortgage deferrals during this time for longer than the one month. It’s important to understand that the length of these deferral plans will vary significantly between lenders and will be determined on a case by case basis. Therefore it is advised that you contact your lender directly.
If you put down less than 20% on your down payment and are insured by one of the companies that provide high ratio mortgage insurance, experts recommend you contact your mortgage professional. They will work with you and your insurance provider to build out a plan that works best for you.
These extended mortgages have been announced to aim to provide up to six months with the five major banks, and many smaller lenders have jumped on board as well. However, there are still many questions that remain unanswered about whether or not these extended deferrals will accumulate interest or if they will negatively impact your credit score, so proceed with extreme caution.
What should I do if I don’t want to defer my mortgage payment?
If you are worried about missing a payment, the absolute first thing you need to do is contact your lender and mortgage professional before you miss a payment. Understand that since the 3rd of April, over 500,000 requests for mortgage deferral had been processed or completed, so if you can’t get through to your lender or broker, it is likely because they are swamped with other clients in a similar position. Try to remain calm and exercise patience.
When you successfully arrange a (virtual) meeting with your mortgage professional, you should begin to gather the personal information lenders will need to fully understand your current financial situation.
- Come prepared with any other outstanding debt, loans and credit card payments.
- Accumulate all household bills, their amounts and due dates. This includes utilities such as hydro, gas, as well as internet, phone and cable bills.
- What are some numbers on monthly expenses? Think about how much you spend a month on groceries, personal care and household supplies.
- If you have a pet or children, what are the expenses you need to put aside to continue to support them?
The more detailed and honest you can be with your mortgage professional, the better.
Inform yourself and come armed with a list of questions. Ask your professional to explain some of the existing options that are already built into your existing mortgage. For example:
- Ask about accessing funds from your (HELOC) Home Equity Line of Credit. If you already have a HELOC set up, this may be a good option short term to get you through this time of crisis. It would be valuable to ask your mortgage professional if this is a good option for you. Much of this will depend on your current financial situation and whether or not you will be able to make the minimum payments required to protect your credit score.
- Ask about extending amortization. This means extending the length of time in which your mortgage is paid off. This helps to reduce monthly payments.
- If you have never had an issue making payments in the past and have a decent credit score, your lender will likely work with you to come up with some other creative solutions. Just bear in mind all of these will depend on your financial ability to bring your mortgage back to current.
Keep in mind lenders do not want you defaulting on your mortgage, if they can help you avoid it. Work with them and be patient and open to creative ways to get yourself through this situation. Just make sure you’re doing your research and asking the right questions to make sure whatever route you take will not get you in over your head in interest payments down the road if you can help it!
Is the Government providing any assistance for those who are struggling to make mortgage payments?
Through the Canadian Housing and Mortgage Corporation (CMHC), the government has purchased up to $50 billion in mortgage debt, to help support banks and lenders in continuing to provide lending services to Canadians and businesses. These are similar measures that were done in the 2008 financial crisis to help protect the economy.
Canadian who are struggling financially are also encouraged to take advantage of the Federal Government’s support plan for individuals. Programs include the temporary salary top-up for low-income essential workers, the special goods and services tax credit, an increase in the Canada child benefit program, and also, the Canada Emergency Response Benefit (CERB).
CERB provides a taxable benefit of $2,000 every four weeks for up to 16 weeks to eligible workers who have lost their income due to COVID-19.
The CERB is available to workers who meet all of the following conditions:
- live in Canada and are at least 15 years old
- stopped working because of COVID-19 or are eligible for EI regular or sickness benefits
- have not voluntarily quit their job
- had an income of at least $5,000 in 2019 or in the 12 months prior to the date of their application.
Visit Canada’s COVID-19 Economic Response Plan to dive deeper into these programs and to learn which ones apply to you and your family.
Additional resources for mortgage payments during COVID-19:
The most reliable information and latest news can be found on:
RateHub is also a great resource; they have tons of reliable content to help you learn about things like mortgages, credit ratings, banking and more .
There are also some great budgeting tools out there. We’ve heard great things about the Mint app. This is a useful tool to help you keep track of your finances and determine where there is room for you to make necessary cuts.
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