We are in the middle of a world wide roller coaster ride with unprecedented restrictions being implemented to deal with the Corona Virus (COVID-19) Pandemic. But what do these extraordinary measures mean for you and your mortgage?
BANK OF CANADA RATE
With adversity comes opportunity – and our current mortgage
situation is no different. In order to
keep our economy afloat, the government reduced the Bank of Canada rate on
March 4, 2020 to 1.25%. As a result of
that decrease, most lenders also reduced their 5 year fixed mortgage rate. Due to that rate drop, many buyers and
refinancing clients were able to secure a great mortgage rate. On March 13, 2020, the government dropped the
Bank of Canada rate another 50 bps to .75%!
To my surprise, many lenders started to increase their rates immediately
after this announcement! If you are
currently looking to purchase a property or refinance your current mortgage,
this is an excellent time to see your Mortgage Broker about locking in a low
MISSING A MORTGAGE PAYMENT
So what happens to your mortgage payment if you are not
earning any income? The government has waived
the waiting period for Employment Insurance benefits for those who are
But what if your work place is shut down
or you have to stay home to be with your children or you are in the service
industry and you rely on tips to meet your monthly financial obligations? If there is a chance that you cannot pay your
mortgage payment due to an income reduction as a result of the COVID Pandemic,
my first advice is to contact your lender immediately. Many lenders have implemented emergency
measures to help clients through this uncertain financial scene. Putting a plan in place with your lender as
soon as possible will help you avoid relying on credit that may ultimately hurt
your credit score. In most cases, your
lender will allow you to miss some mortgage payments…. Please keep in mind
that the interest you “miss” will still be added to the amount you owe on your
If you originally purchased your property with less than a 20% down payment (and have not refinanced your mortgage since), your mortgage is most likely insured by CMHC, Genworth or Canada Guaranty. Contacting your lender the moment that you feel you will not be able to make your mortgage payment is vital. CMHC and other mortgage insurers offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. Their default management tools default management tools include: payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses and special payment arrangements. (https://www.cmhc-schl.gc.ca/en/media-newsroom/Notices/2020/cmhc-statement-covid-19).
There is no need to panic. The government, the lenders, and the insurers are all aware of this time of uncertainty. If you are not sure about your circumstance, please reach out for advice.