Effective immediately, Canada’s six big banks will allow mortgage payment deferrals for up to six months due to the financial impact placed on homeowners over a global pandemic, COVID-19. Mortgage lenders who are currently choosing to participate include are BMO, CIBC, National Bank, Scotiabank and TD.
Some mono-lenders, such as MCAP and Canada Guaranty, are encouraging their borrowers to use skip-a-payment privileges. According to the Canadian Bankers’ Association, the support will be offered on a “case-by-case basis” for challenges such as loss of income, childcare disruption or personal illness from COVID-19.
What does mortgage deferral mean?
Mortgage deferrals are the temporary suspension of mortgage payments in the hopes that this will provide relief for anyone facing financial challenges. Deferral does not mean you will not have to make that payment at all, but rather that you can make that payment at a later date.
This option is typically taken in order to avoid missing a mortgage payment, which can lead to mortgage default and, potentially, the loss of your home.
Typically when deferring your mortgage, you would need to provide proof of financial hardship. All six of these banks have asked that clients interested in the option to defer call in to discuss their options.
Starting today, the mortgage deferral or extended skip-a-payments options will be available for any Canadian struggling to make mortgage payments over the next six months. “The next six months is the actual timeline [when the banks will offer case-by-case mortgage deferral], and this [timeline] will be revised over the next few months if need be,” says Jean-Francois Cadieux, senior manager, public affairs at the National Bank of Canada.
The statements released from each of the six banks also acknowledged that there are relief options for other credit products as well, but no details have been offered as to what this relief includes.
As for banking fees, Cadieux says the National Bank will still be charging monthly fees, but that clients can reach out to discuss the situations they are facing. This policy appears to be the same for all major banks operating in Canada.
How will COVID-19 mortgage deferrals work?
The proposed mortgage deferrals will work like skip-a-payment privileges, but with an extended timeline. This means that borrowers have the option of skipping a mortgage payment but should know that interest on the current mortgage debt will continue to compound during that time (thereby increasing the overall debt, due to non-payment and no reduction of the principal debt).
“If there is a deferral, the interests are recapitalized and the client doesn’t have to do the minimum interest monthly payments during the agreed period,” says Cadieux.
For borrowers, this means that interest accumulated during this time will add to the mortgage debt, but it will not be used to calculate your minimum interest-only payments. To see how this would impact your mortgage in the future, RBC has a skip-a-payment calculator to see what mortgage deferral would cost clients.
For homeowners struggling with a rapid and significant loss of income, the mortgage deferral option will help them avoid missing a mortgage payment and putting their mortgage loan at risk of going into default.
What are other mortgage lenders doing?
A few mono-lenders — mortgage lenders who do not operate as a bank, but instead only deal with mortgage loans — are choosing to participate in mortgage deferral programs due to COVID-19. So far, the mono-lenders with mortgage deferral options include Canada Guaranty, MCAP, RMG Mortgages and Genworth Canada. Some mono-lenders, such as MCAP and RMG Mortgages, are encouraging their borrowers to use skip-a-payment privileges. These lenders are also promising to eliminate all associated fees and guaranteeing clients that the option will not impact homeowners’ credit scores.
For those who hold insured mortgages, the President of the Canadian Mortgage and Housing Corporation (CMHC), Evan Siddall, released a statement announcing that CMHC has promised not to foreclose, or evict any homeowners, on any mortgages for the time being together with Genworth Canada and Canada Guaranty. This is otherwise known as mortgage forbearance and is in place to help protect borrowers.
“We are also exploring, with others, potential relief measures for those who cannot make payments on uninsured mortgages and renters.”
Where to reach out
If you need to contact your bank for mortgage deferral or to discuss your options, we’ve linked all customer service lines here:
- RBC Royal Bank – 1 (800) 769-2511
- CIBC – 1 (800) 465-2422
- BMO – 1 (877) 225-5266
- Scotiabank – 1 (800) 472-6842
- TD – 1 (866) 222-3456
- National Bank of Canada – 1 (888) 835-6281
Article to be updated as information changes