Find out what impacts a payment deferral has on your ability to qualify for a new mortgage.
Like many Canadians who have deferred their mortgages during the COVID-19 pandemic, you may be asking yourself what it means for you and if you’re able to attain a new mortgage – of any kind.
And to put it straight-forward, the answer is no.
If you’ve put your current mortgage payments on pause, you cannot get another mortgage, whether it’s for a new home, refinancing an existing one, or to purchase an investment property.
That doesn’t mean you can’t get a mortgage once the grace period for deferrals is over. But don’t expect it to be easy, warns James Harrison, mortgage broker with mortgages.ca.
Banks and lenders will have many questions driven by the fact that mortgage deferrals are now showing up — in bold — on credit bureau reports.
“Obviously, deferrals are new in the history of mortgages. There hasn’t ever been this option. However, if you’re doing a mortgage deferral, you’re saying you have some sort of financial stress,” Harrison says. “If you apply for a mortgage deferral, it’s on your credit bureau and it’s unknown how long it will be there.”
It’s disappointing, he adds, because banks initially assured that credit ratings wouldn’t be affected by mortgage deferrals when they offered the concession in the early days of COVID-19 economic shutdown.
Still, here we are and while it was relatively easy to take a break from mortgage payments because of the pandemic, it hasn’t been without costs.
Take the client who put his mortgage on hold and then decided to purchase an investment property. The deal was in jeopardy until the client canceled his mortgage deferral, provided proof to his new lender the deferral was in fact canceled and explained why he did it in the first place.
“That’s not necessarily easy to do,” Harrison says. “We got it sorted out, but it was really scary. Really, getting a mortgage during a deferral is a hard no.”
As most deferrals come to an end this could be a great time to restructure your mortgage to lower your interest rate and most importantly lower your payments significantly with a new 30yr amortization which can help with cash flow uncertainty.
Reach out to a pro at mortgages.ca so they can review all of your options and save you thousands of dollars.