Money truth and the COVID-19 crisis

No, you don’t get 6 months of mortgage forgiveness during the COVID-19 crisis.

I am fielding many calls during the current COVID -19 crisis from clients who are assuming they don’t need to pay their mortgage for the next six months, at no consequence to them based on misinformation in the media and social networking. Let me be clear that any solution you arrange with your mortgage holder will be one of mortgage deferral, not forgiveness. Odds are that you will be adding to the cost of your mortgage over its term if you seek to defer. Remember this deferral is reviewed on a case-by-case basis and it may be for a term of fewer than six months.

To make a successful claim you will need to show a couple of things:

1. You are laid off as a result of COVID-19
2. You don’t have the financial resources in which to make your payments
3. This mortgage is on your principal residence (some exceptions may apply)

Your deferral may be set up in a number of different ways depending on the lender:

1. The whole monthly payment is deferred with principle and accumulated interest added to the end of the mortgage term.
2. Your monthly payments are increased at the end of the deferral with any shortfall added to the end of the mortgage term.
3. You continue to pay the interest portion of your mortgage with the principal being added to the end of the mortgage term.

It appears that mortgage providers – beyond the big six banks – will also follow suit and offer some form of temporary relief, based on a case-by-case basis.

In speaking to some lenders, there is a concern that claims are being made by people who have yet to miss a paycheck over a job loss or have the cash reserves to make payments. Remember this is a program designed to help those who need it most. Give some thought to your long-term relationship with your lender. Are they going to be troubled by how tight you are operating your finances at the time of your mortgage renewal? Will your credit score be affected by a claim? (We trust it won’t.)

Remember, there are other options.

The Canada Emergency Response Benefit Act (CERB) replaces previously announced EI programs, ECB and ESB and is intended to be simpler and more accessible to Canadians. The CERB is a support for workers who have lost income due to reasons related to COVID-19. It is a temporary program that provides $2,000 per month to a maximum of 16 weeks. This may prove a better option than a mortgage deferral.

There is also a shortage of workers in many sectors as a result of COVID-19, so there may be some temporary employment available to you that can help ease the financial burden and stress at this difficult time.

We are all in this together. Let’s be creative in finding solutions. Let’s help each other and do our part to help our communities.