My mortgage deferral ended. Now what?

Canada went into a frenzy of uncertainty when Covid struck.

So many Canadians faced unemployment, some had their work hours reduced. With zero or reduced income and a mortgage to pay, this became stress for Canadian homeowners.

Miraculously, the Big 5 banks announced their mortgage deferral programs in March that would give Canadians financial relief until the job market recovered. Homeowners could take advantage of this program for up to six months, with an end date of September 30, 2020.

By the end of June, around 760,000 Canadians or about 16% of mortgage holders applied for this mortgage deferral program. 

While this short-term comfort helped homeowners use their money toward essentials like food, supplies and other expenses, it’s October now and the vast majority of mortgage deferral programs have ended.

For those who are unable to bounce back financially and are gravely worried about jumping back on their mortgage payment, here’s what you can do now:

Ask your lender for an extension

The mortgage deferral program saved a lot of Canadians from financial hardship. It was a lifeline that you and/or your spouse were relying on when you lost your job. 

The first step you can take if you’re unable to pay your mortgage is to ask your lender for an extension on the mortgage deferral program. Lenders are inclined to work with you to get their money back. So, if you can prove that you truly need an extension, your lender will most likely consider this option for you and will walk you through the process.

Keep in mind your lender will view your case with a detailed eye. The global pandemic has created a unique case, so lenders will most likely have a bit more sympathy toward the situation Canadians are unwillingly in. Having said that, a good credit score will help your case!

Borrow money as a temporary rescue

If you aren’t eligible for further mortgage deferral, seek help from your trusted friends or family who are able to help you out. If you don’t want to rely on them, you can use your Home Equity Line of Credit (HELOC) too.

Credit cards will charge you an extremely high-interest rate, so keep that as your last option. The good thing about HELOC is that just like a regular line of credit, you have a fixed payment schedule. The interest rates are also lower as it’s secured by your home’s equity. This way, you get to live in your house without any foreclosure. 

Stretch your amortization 

Another option to look into now that your mortgage deferral has ended is amortization. In simple terms, amortization is paying off your debt or assets over regular installments of interest and principal in full maturity. Talk to your lender and see if you can refinance your house and extend your amortization. 

This option can help you make more affordable payments towards your mortgage. True, it will increase the amount you pay towards your interest, but this also helps you stay afloat. You can even extend your amortization for one period which gives you enough time to get back on track.  

Contact your mortgage broker

When all your options are out and you’re really desperate to provide your family with a roof over their heads, you can seek a private lender to help you out. Private lenders are individuals who use their own capital as a lending product. It is a non-traditional alternative and a mortgage broker can help you find the right product for your situation!

If you have enough equity on your property and are not eligible for HELOC, you can sell a part of equity to the private lender for money which you can use to pay off your credit cards and mortgage. 

Beware! Your interest rate is going to be high. Compared to all the mortgage deferral solutions mentioned, use this only as a last resort since your equity is on the line. 

Tip: Always have an exit strategy with private lending.

If you do have to sell your home…

Now that your mortgage deferral has ended, and none of the above options will work for you, selling your home would be your very last resort. This is highly unlikely, but if you’ve exhausted all your resources and the only option left is foreclosure, here’s what you can do.

Make sure you sell before they decide to foreclose it. This way, you’re in control of the sale and get the highest value that can help you sustain your living expenses before you decide to buy a house again. 

Although mortgage deferral programs have ended, and the economy and job market aren’t back to normal yet, there are options out there to help you get through these hard times. Canadian lenders want to work with you and will provide you with ample options to find what works best for you. 

For more information on how a mortgage broker can help you navigate the end of mortgage deferral programs, give us a call at 506-854-6847 or get in touch with us here!