The mortgage deferral program is finished.
Are you now suffering badly?
Recently reported that Canadian banks
still have over 250,400 mortgages in the deferral program.
Most mortgage deferral programs ended on September 30th, 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 returned 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 one 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 first.
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 mortgage deferral program.
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 terms and conditions concerning making lump sum
or prepayment 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
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
the 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 three top suggestions of what
you could do when your home mortgage deferral program finishes and also you
believe you will remain in financial trouble.
Three 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. Watch
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 six months and see what
your typical monthly earnings have been and what your typical monthly expenditures
were. Now list them 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 percent to 20 percent
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. 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.