For many homeowners, this is a time of tremendous anxiety. In normal times we tend to measure the value of our home in terms of our long-term investment. We may think about the financial return as the eventual pay-off when we retire, or when we upsell and move to another location. In this time of Covid-19, our idea of value shifts dramatically.
We realise how fortunate we are right now to have somewhere to keep our families safe, a place from which to work remotely as best we can, a place to be close to the ones we love the most while having to social distance elsewhere. It’s natural that one of the most stressful things in our lives at this time is the prospect that we could lose our home through no fault of our own. Our job may be lost, our income reduced, our ability to work severely impaired. After working hard to save for our down payment, to meet the requirements to qualify for a mortgage, and to budget our household income to provide for our family’s needs, we are suddenly faced with circumstances never imagined and beyond our control.
So, if you find yourself in this situation, I am encouraging you to take advantage of the lifeline that has been thrown out for mortgage payment deferral in Canada. Our country’s six major banks, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Bank of Nova Scotia and TD Bank Group, made a joint public statement in March that they would undertake to assist their clients to manage their financial obligations through this difficult period. Among the solutions offered is a mortgage payment plan which allows a borrower to defer payments up to six months. In general, the mortgage payment deferral plan works like this:
1) Apply to your bank for the deferral plan; you cannot just stop payments;
2) You can choose to postpone your monthly payments for up to six months;
3) During the deferral period, your mortgage interest will continue to accrue;
4) When you resume your payments, the accrued interest will be added your principal;
5) Your new monthly payment may then be a bit higher than it was previously.
There was some initial criticism of the Banks’ payment deferral plan because it did not cancel the interest owing on the mortgage principal during the deferral period. However, it is important to remember that banks are also responsible to their investors and a sturdy financial system is what allows us to obtain a mortgage in the first place. Every part of our national economy, of which the real estate sector is a major component, is under stress because of Covid-19 pandemic, and we must all get through this challenging time together.
Similar mortgage payment deferral plans have also been made available thought most credit unions, and as a short-term solution for financially stressed homeowners, these plans can mean the difference between keeping your home or losing it. Banks do not want to foreclose on any homeowner. The Covid-19 crisis has hit everyone very quickly and our institutions are responding to a situation never encountered before.
There will no doubt be many individual cases which require special attention, and we have been reassured that flexibility on a case-by-case basis will be the way forward. In its March announcement, the Banks stated: "These measures are an important first step and underscore the resilience of Canada’s financial system and the strength of our major banks. Banks will monitor evolving economic conditions and consider other measures if necessary. Canada’s banks have a long history of standing by Canadians through challenging times, and this commitment will continue throughout this crisis and beyond."
I want to also remind my clients, who I also consider my friends, that I am available to help them navigate their particular challenges and find solutions that fit their specific needs. I will employ my formal education in business, my experience in the financial industry, and my professional knowledge as a realtor to do everything I can to assist you at this time. Please feel free to call and let me know how I can help.