Here’s 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, it’s important to try again at another time, particularly if you’re calling to defer mortgage payments during the COVID-19 pandemic.
What is a mortgage deferral?
Canada’s 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 . “The thought is in six months we’ll 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, it’s important to speak to someone directly about halting payments to ensure you and your lender are on the same page. Don’t 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 don’t 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 it’s interest-free for six months and the government is covering it,” he says. “They’re not.”
The good news is deferring your mortgage — officially — shouldn’t affect your credit score. But it is up to banks to let credit monitoring agencies know what’s happening on your behalf. Given the average bank employee’s workload right now, it’s 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.