Q&A: Should you defer your mortgage payment during the COVID-19 pandemic?

Canada's six big banks have promised financial relief for Canadians financially affected by COVID-19.

Bank of Montreal, CIBC, National Bank of Canada, RBC Royal Bank, Scotiabank and TD Bank all agreed that support would include mortgage payment deferral for up to six months.

But should you take advantage of that offer?

Jason Scott, a mortgage broker with TMG The Mortgage Group, talked about the deferral process on CBC's Radio Active on Wednesday.

The interview has been edited for length and clarity.

Q: How would a six-month mortgage deferral work? Do people get charged interest if they defer?

A: The big banks and other lenders are potentially offering this on a case by case basis. I really should stress that if you're still working or if you have savings, it's best to not contact the lenders right now because they're absolutely flooded with calls and service times are super slow. 

But what will happen is, if you are granted a deferral, the payment is deferred. The interest that you would have otherwise paid is added to the mortgage. And yes, you would ultimately pay interest on interest.

Q: Who might qualify for this?

If you've lost your job or you're in self-isolation and income is disrupted, you likely qualify. Lenders understand that people are going through difficult times and they're going to be flexible. They have family as well. Their family may have lost jobs, so they're going to do what they can to help to keep people in homes.

Q: If somebody has savings, would it be best to just keep paying mortgage payments rather than create a bigger problem down the road?

A: Yeah. For starters, you'll save money. But the other thing to keep in mind is we basically want to flatten the curve on the calls to the lenders, much like flattening the curve to the hospital system. Right now, lenders are adding hundreds of phone lines and they still cannot keep up with the volume of calls they're getting.

Where there might have been a 24-hour turnaround before, now it's three to five days. So if you've contacted your lender and you haven't heard back yet, they haven't forgotten about you. Just be patient; they'll get to you.

Q: Do you expect all the banks to handle this the same way?

A: I would imagine that every lender will have their own policies. When you contact them, explain the situation. And as I said before, they will do whatever they can to help people. You're not guaranteed a full six-month deferral, nor do you have to take six months if you are granted a deferral. It is not payment forgiveness. You will ultimately end up having to pay the money back down the road.

Q: Not everybody has savings, so are there other things people could do instead of deferring payments for months?

A: If you're fortunate enough that you're still working and you're worried about a potential situation coming up, reach out to a mortgage broker. We can provide multiple solutions and maybe it's a situation where you can refinance and extend your amortization out to lower payments or to roll in more expensive debt.

Q: Will it affect your credit score if you defer payment?

A: It shouldn't. Lenders know what is going on, obviously. If you are granted a deferral, get an email from your lender saying that was the case. No system is perfect, so it's possible that errors could report on the credit bureau and you'll want that backup information to prove that. But they will not intentionally lower your credit because you've had a deferred payment.

Q: Will this be available to landlords, who could potentially pass it along to their renters?

A: I suspect a lot of tenants will be reaching out to their landlords saying that they've lost their jobs, so landlords will be able to reach out to lenders. It's case by case. Lenders are going to do what they can to make sure people stay afloat.