Are you trying to figure out a financial plan to make ends meet during COVID-19? Or are you researching your potential options if the situation continues over the next few months? If you answered yes to either of those two questions, you are not alone. That’s why the Canadian Bankers Association (CBA) confirmed that nearly half a million eligible customers of Canada’s largest banks are being given the opportunity to defer their mortgage payments.
On March 17, 2020, the Royal Bank of Canada, TD Canada Trust, the Bank of Montreal, CIBC, Scotiabank, and the National Bank of Canada said that they would allow eligible customers to defer their monthly mortgage payments for up to six months. On top of this, the skip-a-payment measure can now be accessed by eligible Canadians during this time, even though banks typically only offer this option once per year on certain mortgages without consequences to their credit score.
Since implemented, borrowers have been flooding the phone lines of banks with thousands of calls for mortgage assistance and information. Requests for deferrals have surged as unemployment numbers continue to soar.
The keyword above here is that you must be eligible to receive this option. You must be experiencing financial pressure as a result of the pandemic. However, there is still some confusion around how deferrals are structured and whether a skipped payment could hurt credit scores. This has left many Canadians unsure about how to deal with housing costs in the midst of this pandemic.
Sectors within the financial industry are currently working together to help minimize potential negative impacts on credit standing and more answers are sure to be proposed within the coming weeks. What remains the same is that it’s in the banks' best interest that their clients not be mistakenly penalized for taking advantage of special payment plans offered during this time. Banks want to be able to lend money and lower credit scores are necessary to do that. Nevertheless, be sure to keep an eye on your credit report to ensure there are no errors. While you may run into delays challenging errors found, the good news is that there is no rush to do so unless clients are looking to apply for credit/loans in the near future.
Keep in mind that if you take advantage of the deal, you will still eventually have to catch up on the postponed payments and you could face an increase in interest costs over the mortgage term. At the same time, we are living in a unique situation where extraordinary measures need to be taken. So, while it may add cost, it won’t change the trajectory of your personal finances. Ultimately, take advantage of these financial measures if you need to – they were put in place to help you and there is more benefit than cost if it means that it can help you can keep your home.
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