How to defer your mortgage payment in Canada

Published by:
Sarah Chen

Reviewed by:
Alistair Vigier
Last Modified: 2024-05-11
Are you trying to defer your mortgage payment in Canada? As the ever-changing economy sweeps across our lives, it is not unusual for unexpected financial challenges to arise.
A job loss, a family emergency, or a sudden economic downturn could make meeting mortgage payments more difficult.
If you are facing a similar situation, fear not! I’m here to tell you about a resourceful solution to such a financial crunch: deferring your mortgage payment, particularly in the context of Canada.
But let’s take this step by step, right from the heart of the matter, moving gradually into the hows and whys of deferring mortgage payments.
Eligibility Criteria for Mortgage Payment Deferral in Canada
What exactly does it mean to defer a mortgage payment? Imagine this: you’re driving down the financial freeway of life, and your next mortgage payment is a roadblock lying just ahead.
Deferring your mortgage payment, in essence, is like taking a temporary detour around this roadblock.
This doesn’t mean you’ll never have to confront it. Rather, you’ve simply bought yourself some time before you need to tackle it.

Mortgage payment deferrals
The financial system in Canada is well-equipped to handle mortgage payment deferrals, thanks to the robust structures in place. Financial institutions understand that life doesn’t always go according to plan, and they are often ready to accommodate homeowners during their times of need.
Deferring your mortgage payment in Canada is, therefore, a formal agreement between you and your lender that allows you to postpone your payments for a specified period.
You might be wondering, “That sounds good, but are there any hidden strings attached?” To answer that question, we need to remember that banks are businesses.
They use the money from your mortgage to fund other operations. While they may agree to defer your payments, they usually compensate for the missed payments by adjusting the subsequent ones.
Steps to Request a Mortgage Payment Deferral with Canadian Lenders
After the deferral period, you might see a slight increase in your mortgage payments. This is to ensure that the bank recovers the money it had initially planned on receiving.
Interest typically continues to accrue on the unpaid amount during the deferral period, which can add to the overall cost of your mortgage.
It’s essential to remember, though, that deferring your mortgage payment is not a step to be taken lightly. It’s a tool meant to help you navigate a temporary hardship rather than a long-term financial strategy.
You should take advantage of this facility only if necessary, and not use it as a crutch for other financial irresponsibilities.
Rules and procedures for this process
When it comes to actually initiating a mortgage payment deferral, you’ll need to contact your lender. Every lender in Canada has their own set of rules and procedures for this process, so you’ll need to work closely with them to understand what steps need to be taken.
Be prepared to explain your situation fully and provide any necessary documentation to show that you’re truly in need of the deferral.
Despite the challenges involved in deferring mortgage payments, it’s comforting to know that such an option exists. Financial stress can be incredibly overwhelming, but resources like these can provide a lifeline when it’s needed most.
Potential Impacts on Credit Scores: Deferment and Canadian Mortgages
Remember that it’s always worth having a conversation with your lender if you find yourself in a tough spot. They are there to help, and finding a solution that works for both parties is in everyone’s best interest.
After all, life is full of surprises, both good and bad, and having a bit of financial flexibility can make weathering the stormy periods much more manageable.
So, if you’re finding the road of financial life a bit too bumpy in Canada, remember this deferral tool in your toolkit. It might just be the lifebuoy that helps you stay afloat when the tides of life get a bit too high.
Is deferring a mortgage payment bad?
The global pandemic and the ensuing economic downturn that began in 2020 are prime examples. Thousands of homeowners found themselves wondering if deferring their mortgage payments would be their only life raft amid the raging sea of uncertainty.
But is it a move that comes without repercussions? Is deferring a mortgage payment necessarily a bad thing? As I reflect on this, I feel it’s important to underscore that every situation is unique and warrants a nuanced perspective.
Allow me to clarify what mortgage payment deferral is. Simply put, it’s an agreement between you and your lender that temporarily allows you to reduce or suspend your mortgage payments for a set period.
This doesn’t erase your debt or halt interest from accruing on your loan; it merely postpones payments to a later date.
Postpone mortgage payments
But why would anyone want to postpone their mortgage payments, you might wonder. Well, life happens. Maybe it’s a job loss, a health crisis, or some other significant financial setback that leaves you in a pinch. It’s in such times that mortgage payment deferral might seem like a godsend. But it’s not all rainbows and butterflies.
On one hand, deferring your mortgage payment can provide immediate financial relief when you need it the most. It’s like a safety valve releasing pressure when things get too hot.
This respite can provide you with much-needed time to stabilize your finances, find new employment, recover from a health crisis, or adjust to new financial realities. For many people, this temporary relief can make the difference between keeping their home and facing foreclosure.
Deferring your mortgage payment
On the other hand, it’s essential to bear in mind that deferring a mortgage payment is not a free pass. As I mentioned earlier, interest continues to accrue on your loan, and this can lead to an increased loan balance. In other words, you’ll end up owing more than you initially borrowed.
This can elongate the life of your loan, leading to more interest payments over time. It’s like a silent river, quietly but incessantly wearing down the rock. And before you know it, you’re knee-deep in a financial quagmire that’s more difficult to escape than you had imagined.
Deferring your mortgage payment can potentially impact your credit score. This depends largely on how your lender reports the deferral to the credit bureaus. If it’s reported as a late payment, it can affect your credit score.
This can affect your ability to secure new credit or loans in the future, or it might mean you end up with higher interest rates on future loans. It’s like a shadow that follows you around, reminding you of your past decisions.
How Interest Works
Another thing to consider is the psychological toll of knowing you have a growing debt. For some, this can lead to stress, anxiety, and even depression.
While deferring a mortgage payment can offer temporary financial relief, it can also contribute to emotional strain, creating a tug-of-war between financial pragmatism and mental well-being.
To wrap up my musings on whether deferring a mortgage payment is bad, I’d say it’s a matter of perspective. It’s not inherently bad; it’s a tool that can be useful in certain circumstances.
It’s not a decision to be taken lightly. Think of a double-edged sword – handle it with care, or it might cut deeper than expected. It’s always advisable to consider other options, like refinancing your mortgage, seeking financial counselling, or even selling your home if possible.
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