When the pandemic shut down the Canadian economy in March, Canada’s Big Six banks were quick to offer help to homeowners in the form of deferred mortgage payments for six months. The result was seemingly a success – payments were deferred on more than $180 billion of residential mortgage and real estate-secured loan balances before April 30th, allowing Canadians to stay afloat despite mass layoffs and loss of income in the wake of COVID-19.
That being said, many Canadians are still unaware of what exactly deferring their mortgage payments might mean for their financial situation and how it will impact them when it comes to building relationships with future lenders.
It’s unclear where the miscommunication lies, but it’s likely that the pandemic hit so hard and so fast that The Big Six didn’t explain the implications of deferrals clearly enough, that mortgage brokers may not have outlining the process effectively to their clients or that borrowers rushed to accept the offer without reading through the fine print.
While banks are claiming that participating in the deferral program will not affect clients’ ability to apply for financing with them in the future, credit bureaus are telling a different story. Many people who have deferred their mortgage payments are noticing that these payments are showing up on their credit reports as “Mortgage Deferred Payment Plan” – indicating to future lenders that they chose not to make their housing payments in recent months and potentially flagging them as a lending risk.
Most clients did not believe that participating in this relief program would affect their credit reports, and many people chose to participate not necessarily because they had to but because they figured they may as well free up some liquidity.
Interestingly enough, a number of the Canadians who deferred their mortgage payments during COVID-19 did not call a broker for help as the program seemed straight-forward. At Capital Mortgages, we always recommend quickly consulting with your broker before opting to participate in a program that could affect your financial standing – even if it does not seem so at first glance.
Do you have further questions about mortgage deferrals? Don’t hesitate to give us a call at 613-228-3888 today.