Mortgage Deferrals Pros and Cons

by | Oct 27, 2020 | Personal Finances | 0 comments

One of the effects of COVID-19 has been the negative impact on the economy. With many residents in the Niagara Region losing their jobs or suffering lay offs, the ability to make mortgage payments has been a primary concern.

The lending community responded immediately offering the option of deferring mortgage payments for those borrowers facing loss of work or substantial family income reductions. Lenders will not defer your mortgage payments indefinitely. The typical deferral period is three-months and extensions can be requested based on extenuating financial circumstances.

The decision to defer your mortgage payment has many pros and cons. If you’re not sure if this is a sound option, let’s connect for a quick chat to run through your current situation.


Does deferring a mortgage payment hurt your credit score?

Deferring your mortgage payment does not negatively affect your credit score. This relief mechanism is recorded on your Equifax credit bureau as “affected by natural or declared disaster” with a payment frequency of “deferred” and a zero-dollar required monthly payment. Even though the lender has reported that no payment is required for a specified time period, it should be noted that the normal monthly payment will be factored into any requests for additional credit.


What happens if you defer a mortgage payment?

Any payments that are deferred are added to the end of your current mortgage contract. If your current mortgage term expires on July 1, 2021 and you have deferred three monthly payments, your new contract expiry date will be October 1, 2021. Your lender may also offer a skip-a-payment option which can be added to the deferral period, giving an additional one-month payment hiatus.
Deferring your mortgage payments could potentially have a negative effect on your ability to access competitive future mortgage financing. The primary reason for this is that lenders consider a multitude of factors in evaluating credit requests, including credit history.


Deferral Mortgage Calculator

Dealing with the negative income effect of COVID-19 on can be stressful. It is a decision that should not be entered into quickly. There are lots of great tools available to help you evaluate the impact of deferring your mortgage payment. Check out our mortgage calculators to see if this is the right choice for your family.

For more information or to book a no obligation consultation, please contact [email protected].


Sharing is Caring!