Clients could face credit score hit with deferred payments – Some Clients of the big banks couldn’t get answers about mortgage deferrals over the last few days. The reason being is eligibility requirements are changing by the hour. However the banks and trying hard to keep up with all requests.
The big bank call centers have been inundated with phone calls of clients trying to see if they qualify for any programs or mortgage deferrals.
The mortgage deferral program seems to be available to all mortgage holders however it is structured that the big banks will not lose any money and will end up making more in the long run.
What does a deferral mortgage payment mean?
The deferral mortgage payment program means that the monthly interest accrued each month will be added to the principal amount you owe. Meaning, the client will be paying interest on top of interest for those payments that were deferred. Basically the bank is loaning you the money on the deferred payments. This means your payments when you renew your mortgage will be higher.
If you are not desperate do not take this offer, all you are doing is increasing your debt load. Also if you do not want a larger payment when renewing your mortgage, you will need to do a full credit application. Which could and most likely affect your credit score.
All the big banks have more information on their websites for you to look at. Please check your banks website.
Clients could face credit score hit with deferred payments
Bottom line is if you do not need the deferral program do not take it. The Canadian Bankers Association issued a statement saying, “Customers should understand that (a deferral) is NOT mortgage forgiveness. Mortgage deferral means that payments are skipped for a defined period of time, during which interest which would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage.”
Credit card deferral payments
Most banks are offering credit card deferral payments up to six months as well. Be aware that when the six month deferral period is up minimum payment would included all interest from the deferred payments. Usually minimum payments are interest plus $10 per month (on average).
All in all the big banks are willing to work with Canadians and small businesses who have financial hard times caused by COVID-19. They are looking to help you pay your debt off. Good luck and stay safe!