Mortgages.ca

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Getting a Mortgage During a Pandemic

Home buyers getting into the market and home owners looking to refinance wonder whether a new mortgage is possible right now.

It is, but with some caveats.

A recent first-time home buyer decided honesty was the best policy when he lost his job during the current COVID-19 crisis.

With just two weeks before the deal closed on his new home, he told his bank what happened. His parents co-signed on the mortgage and the deal moved forward, but the home buyer could have landed in serious financial trouble without that safety net.

He was at risk of losing his deposit and being sued by the sellers for money they would have lost had the deal fallen through.

Can I get a mortgage right now?

All this to say Canada’s large banks are still financing home purchases, even with an economy that’s all but halted. But they are being more conservative with their lending, says James Harrison, president and mortgage broker with mortgages.ca.

For starters, they’re no longer making exceptions on debt-service ratios and they’re eliminating discounts on prime and variable mortgages. Self-employed applicants will also have a harder time getting a mortgage with banks more thoroughly scrutinizing the industries in which they work.

Updated letters of employment are now essential for approval. Banks have started asking mortgage applicants for pay stubs up to two weeks before deals close, too, and they’re calling employers to confirm clients still have a job.

“Get your files in order,” Harrison advises. “Get your conditions met as soon as possible so there are no problems later and deals can close.”

Be prepared to wait.

Still, it will take longer for deals to be funded because banks are swamped right now. Mortgage applications were up 400 per cent when the pandemic started taking its toll economically, Harrison says.

Home buyers were taking advantage of low fixed rates at the time. Homeowners looking to refinance also jumped at lower interest offered after the Bank of Canada dropped rates.

Approval on financing can now take up to 10 days with clients waiting up to four weeks to get that cash in hand.

The key is to work with an experienced mortgage broker who can help navigate financing during these unprecedented times and get the best rates for homebuyers and homeowners in the process.

“It’s not the time to drag your feet and rate shop,” Harrison says. “Have the conversation with an experienced mortgage broker, know what’s out there and get your approval in place. Don’t be left in the dark because everything is changing so fast.”

 

Home Ownership, Mortgage Education

Understanding Mortgage Deferrals during COVID-19

Heres what you need to know about pausing your mortgage payments

Getting through to a bank can be a test of patience right now.

Those trying to connect to a bank employee have two options: endure the long wait time by testing your music trivia knowledge against the on-hold soundtrack or hang up.

If you choose to hang up, its important to try again at another time, particularly if youre calling to defer mortgage payments during the COVID-19 pandemic.

What is a  mortgage  deferral?

Canadas six largest banks offered to pause mortgage payments for those who lost work or faced financial hardship after COVID-19 slowed our economy to a grind.

Large banks are allowing customers to postpone their mortgage payments for six months, and so far, more than 210,000 Canadians have requested the relief.

Some smaller non-bank lenders are offering mortgage payment deferral programs, too, but they may only suspend payments for a shorter time.

The strategy is to get everyone to just stay home,says James Harrison, president and mortgage broker with mortgages.ca. The thought is in six months well be back up and running and can make payments. But in the meantime, people can use that money to buy groceries and keep the lights on.

Whatever the case, its important to speak to someone directly about halting payments to ensure you and your lender are on the same page. Dont let the frustration of being on hold cause you skip payments without permission, assuming your bank will understand why.

What are the long-term effects of deferring mortgage payments?

Your credit score will nose dive if you dont make it official with your bank that you need a break from your mortgage payments. So stay on the line or try again, no matter how long it takes. Approval is typically automatic once you do speak to a bank employee.

However, keep in mind you will have to start paying your mortgage again. Payments will be higher when you do, Harrison warns, because interest is still accumulating on your principal and on the interest you were already paying. Do the math to ensure your mortgage will be manageable when payments resume.

A lot of people think its interest-free for six months and the government is covering it,he says. Theyre not.

The good news is deferring your mortgage officially — shouldnt affect your credit score. But it is up to banks to let credit monitoring agencies know whats happening on your behalf. Given the average bank employees workload right now, its best to get that guarantee in writing or ask for the name and employee number of the person helping you in case you need that information later.

Otherwise, this short-term gain could lead to long-term credit pain.