Angie Alvarez

What you can do about mortgage payments during the COVID-19 outbreak!

WE ARE HERE FOR YOU!

The continued spread of COVID-19 has understandably raised concerns for you and your families. You may have questions about the financial market and/or your mortgage. Please know that we are available to help guide you and your family through these turbulent times. We at Capital Home Lending understand this is an uncertain time for everyone and we are here to continue to support you, whatever your needs may be.

Many people have been asking about the COVID-19 Deferred Mortgage Payment Program.

During these challenging and uncertain times, many lenders have programs in place to address payment difficulties caused by the current COVID-19 pandemic. This includes a deferral of mortgage payments for up to six months.

Keeping you informed. Here is what you need to know:

This is not a loan/debt forgiveness program

Many banks and mortgage lenders, in partnership with our mortgage insurers, have announced they will work to support and assist individuals whose income has been impacted by the COVID-10 outbreak. This is tremendously comforting to those individuals who will find themselves in financial hardship as a result of income reduction or cessation due to quarantine or business challenges.

These supports are provided by the lenders who offer them on a case-by-case basis, and individual borrowers’ circumstances will determine their respective eligibility.

Industry members are reporting that some Canadians have incorrectly interpreted media reporting of these programs as providing a payment amnesty or loan forgiveness, regardless of your current financial circumstances. Lenders are becoming inundated with calls from borrowers asking for assistance who have not been directly financially impacted by the crisis

Lenders maintain the legal right to timely repayment of their mortgages. Mortgage payment deferral programs are offered at their sole discretion.

No lender is going to forgive your mortgage payment.

A deferred payment program allows you to roll a defined number of mortgage payments into your mortgage. You still pay all of the money you owe, with interest.

Borrowers are still responsible to meet their obligations where they can. 

You must be able to demonstrate true financial hardship.

These programs are for people who are genuinely struggling to make their next mortgage payment. Those who have lost their job and/or most of their income, and don’t have reserves to draw on. If you’re not in this group, you aren’t likely to be eligible.

Be prepared to submit a detailed breakdown of your personal assets, income and expenses.

Note: If you don’t fall into this distressed category, please don’t call your lender right now.

Frequently Asked Questions:

What does ‘payment deferral mean? And why isn’t it interest free?

A payment deferral means your lender will allow you to have a break from your regularly scheduled principal and interest payments for an agreed-upon period of time. The interest on your mortgage loan continues to accrue but it is added to your outstanding mortgage principal instead of becoming due on your usual payment dates. Note that payment deferrals could extend the amortization period of your loan. However, once you are able to re-start a regular payment schedule, lenders can help you get your amortization back to where you want it to be by using one of your flexible pre-payment options. There is no interest free deferrals.

Note: Any deferral granted will not apply to tax and insurance payments, which must continue to be paid by you.

I own a rental property, the tenant can’t pay the rent because they have been laid off, what can I do?

Please contact your lender to discuss your situation and options. The last thing any lender wants is your mortgage going into a delinquency status. If you are having financial hardships, this will be assessed on a case by base situation.

Note: Some provincial governments have introduced tenant relief programs. Rental-property owners can also encourage their tenants who have been adversely impacted by COVID-19 to apply for these programs if available.

Is there a fee to hold or defer my payment?

Most lenders are waiving / refunding the non-sufficient funds (NSF) fee for missed or stopped payments

If I defer a payment(s), will this impact my credit rating?

A lender-approved deferment isn’t counted as a missed payment. Deferring your loan payment doesn’t have a direct impact on your credit score. Your loan may continue to accrue interest, and you might pay more in the long run, once you resume making payments.

I am having trouble getting through to my lender, what can I do? Communication is key.

Lenders are experiencing an unprecedented volume of requests.

If you’re about to miss a payment, call first. Wait times may be longer, however, specific lender hotlines have been facilitated to accommodate the current volumes. If you are about to miss a payment and can’t get through on the phone lines, send your lender an email. Lenders will often waive NSF fees if you miss a payment but can demonstrate that you tried to notify them in advance.

If your payment is not due within the next 7 days, try to email first.

If you can, contact the person/broker/agency that arranged your mortgage in the first place. They can help answer any questions you have or navigate you through any requests.

Other options are often available.

In addition to rolling payments into your mortgage for a specified period of time, lenders also have the ability to refinance your mortgage to pay out other debt (subject to qualification), restore your original amortization (which lowers your payment amount), hold a payment (during a temporary suspension of income), or offer you a reduced payment for a specific time.

You can also choose to borrow from your home equity line of credit (HELOC), which is a revolving credit line that essentially uses your home as collateral. It provides flexibility when borrowing and repaying. Of course, you’ll still have to eventually repay your HELOC and keep up with minimum payments, but it’s a decent temporary solution if you already have a HELOC set up.

These are difficult times, and lenders are working around the clock to respond to customer inquiries and help the borrowers who are adversely impacted by COVID- If it’s taking a long time for you to make contact, please do keep that in mind, when you do finally get a live person on the other end of the phone.

We are here for you!

Keep well & stay safe!

Sources: Mortgage Professionals Canada, First National, Verico Communications 

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¾ percent. The Bank Rate is correspondingly 1 percent and the deposit rate is ½ percent. This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canadas economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.

It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canadas economy. In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.

The Bank will provide a full update of its outlook for the Canadian and global economies on April 15. As the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.

The Bank has also taken steps to ensure that the Canadian financial system has sufficient liquidity. These additional measures have been announced in separate notices on the Banks website. The Bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities.

March 13/2020

*source: Bank Of Canada

A little less stress in the test…

The federal government has announced its response to the rising chorus that has been calling for changes to the mortgage stress test.

Starting in April the qualifying rate for the stress test on insured mortgages (those with less than 20% down payment) will be based on the weekly median 5-year fixed insured mortgage rate, plus 2%. At the time of the announcement that would have been 4.89% (plus 2%). That is 30 basis points lower than the currently qualifying rate of 5.19% (plus 2%) which is based on the posted 5-year fixed mortgage rates at the Big Six banks.

Actual contract rates have been falling for some time so the stress test rate has been moving further and further out of sync with real mortgage costs. Using the new formula will allow the stress test to move as the market moves.

The federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), says it is considering the same benchmark rate for its stress test on uninsured mortgages (those with more than 20% down).

As of right now, the new formula will decrease the income requirement on a $300,000 mortgage by about $1,500. Most market watchers see it as being most helpful to buyers who are right on the cusp of being able to pass the stress test.

Alternatively, it will allow those who can easily pass the stress test to purchase about 3-5% more home.

These changes will come into effect on April 6, 2020.

The new benchmark rate will be published on a Wednesday and come into effect the following Monday.

The new Benchmark Rate for insured mortgages will be published weekly on the Bank of Canada’s website, and will be based on submitted mortgage insurance application contract rates. If, on any given week, there are any delays in updating the new Benchmark Rate, the previous week’s published Rate will stand until a new Rate is published.

Reference: First National Financial LP / Mortgage Broker News