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Mortgage deferral program introduction
Better Dwelling, Canada’s largest independent housing news outlet, recently reported that Canadian banks still have over 254,000 mortgage deferral program.
Most mortgage deferral program ended on September 30, 2020. The purpose of this Brandon’s Blog is to discuss what the mortgage deferral program was and since it is over, now what?
What was the mortgage deferral program?
The mortgage deferral program was an agreement between borrowers and their mortgagees, being Canadian banks. It permits mortgagors to delay their home loan payments for a specified amount of time.
After the deferral period ends, they return to making normal home loan payments. Once payments resume, they need to also pay off the home mortgage payments that were put on hold. Your financial institution figures out just how people repay the deferred payments.
Who could apply for the mortgage deferral program?
Financial institutions evaluate the qualification criteria for home loan deferrals on an individual basis. People might have been eligible for the mortgage deferral program if:
- you, or any person in your household, are out of work as a result of COVID-19; or
- you, or any person in your family, experienced a considerable reduction in revenue as a result of COVID-19.
What to expect from the mortgage deferral program
A mortgage deferral program does not cancel, get rid of or eliminate any amount owed on your home mortgage. Interest charges also do not stop when on a payment deferral program. At the end of the arrangement, you will have to return to normal payments according to your original amortization schedule.
The interest that hasn’t been paid throughout the deferral period continues to be added to the principal owing on your home loan. This obviously affects the full amount you owe and therefore the amount of total interest you will pay over the life of your mortgage.
Loan repayments are comprised of both interest and principal. The interest accrues daily. When a payment is made, the amount from the total payment needed to pay down interest is allocated that way. The leftover from that monthly payment is applied to pay down the principal balance.
Over time as the primary balance goes down, the amount of interest from each payment becomes less. The way the arithmetic works, means, as less interest is being paid, more of the monthly blended payment is allocated to repaying principal. The more time that passes where the principal balance does not decrease due to the mortgage deferral program the more interest winds up being paid.
What about paying certain fees during the mortgage deferral program period?
Particular charges for either the administration of or for additional products connected with mortgages could not be waived during the mortgage deferral program. Sometimes, people opt for the bank’s additional mortgage life, disability or critical illness insurance policies to cover their mortgage payments in the event of illness or death. The insurance premium is added to the monthly blended mortgage payment.
Likewise, many people pay one-twelfth of their annual property taxes each month added to their normal monthly mortgage payment. The property tax portion is subject to annual adjustment to account for the difference between the estimated annual property taxes and the actual property tax, once known.
These kinds of payments had to continue notwithstanding any mortgage deferral program period.
What can I expect once my mortgage deferral is over?
When the mortgage deferral program is over and routine payments return, you’ll have the option to maintain payments as they were or increase them. If you can, you could also make a round figure payment amount. The aim is to catch up as quickly as possible on the interest that accrued during the mortgage deferral program period.
You can catch up to your pre-deferral amortization without incurring any type of extra charges. As soon as you’re caught up, any additional payments you might make would be based on your mortgage’s terms and conditions concerning making lump sum or pre-payment to your principal balance without incurring a penalty.
The mortgage deferral program has ended: What if I still can’t pay?
Just because the mortgage deferral program has ended, it does not necessarily mean that everyone can afford to go back to making normal mortgage payments. The coronavirus pandemic with its business closures and always looming lockdowns has not become easier for many.
People whose financial situation has not become better since the pandemic hit, are frightened. I have checked out some “what to do” short articles about if you are having difficulty making your regular home mortgage payments. Most point readers to looking at how a consumer proposal or bankruptcy might help.
Just so you understand, a consumer proposal or bankruptcy are not designed to help you make mortgage payments. In fact, they may lead to you having to sell your home.
Your mortgagee is a secured creditor, presuming its mortgage security is valid and properly registered. A consumer proposal or bankruptcy is a technique of handling your unsecured creditors. The mortgagee has rights if you default on your home loan whether or not you are involved in an official insolvency process.
If you have way too much financial debt and inadequate income to service all that debt, you may very well need to think about an insolvency filing. Yet it is not a straight answer to your mortgage deferral program finishing.
So in order, below are my 3 top suggestions of what you could do when your home mortgage deferral program finishes and also you believe you will remain in financial trouble.
3 steps you can take if you still have trouble making your mortgage payments
Take a critical look at your family household budget plan
I cannot stress sufficiently just exactly how essential the household budget is to your financial safety and security. A spending plan is a listing of all family earnings and all household expenses. Do it on a month-to-month basis. It allows you to prepare just how you need to spend your cash and if there is anything left over monthly for savings for a reserve or for financial investment.
Rather than money just flying out of your pocketbook, you make intentional choices on where you want your money to go. You’ll never ever question at the end of the month where your money went or search for spare change in your purse or wallet.
So if you already have a home budget that you follow, take a look at it carefully. If you don’t’ have one, prepare it right away. Consider the last 6 months and see what your typical monthly earnings have been and what your typical monthly expenditures were. Note them full blast line by line for both earnings and also costs. Then adjust any line that you think might change in the coming months.
After that have a look at it and see if you are spending less or more than you make. If you are spending more, then you need to reduce particular expenditures, raise your revenue, or a mix of both. Reduce any costs that you can. Get to the point where, as a minimum, you are not spending more than you earn. Ideally, you want to spend less than you earn, on an after-tax basis, so that you can build up an emergency fund in case of, an emergency.
Talk to your banker
Be proactive and get in touch with your banker when you suspect a problem. Let them know that you have an existing family budget plan and it reveals that you may require some help. Tell your banker that with the end of the mortgage deferral program period, you still need help.
Your banker will be impressed that you:
- have a spending plan that you are tracking; as well as
- you are being proactive and also not triggering the lender to chase you since you turned up on the computer screen as a late payment.
That already makes you the most liked person in the 10% to 20% of individuals who are experiencing trouble paying their home mortgage. Ideally, your lender will be able to do something for you to help.
Call me
If your spending plan shows that you do not have enough family revenue to pay all the family members’ financial obligations on a regular monthly basis, call me. I will take a look at your family budget plan and perhaps get more financial details from you. After evaluating all of it, I will give you my ideal recommendations to meet your unique economic difficulties.
Remember that this is not your fault. The COVID-19 pandemic and the resulting shutdown of the Canadian economic climate continue to cause trouble for the majority of Canadians.
Mention this blog, and I will not charge you a cent for this assistance. I really want you to prosper.
Mortgage deferral program summary
I hope you have found the mortgage deferral program Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.
We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.
Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.
Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.
If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.
The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.