How mortgage deferral works - in Covid-19 Pandemic
March 30 2020 Posted by Gary Bhutta
How mortgage deferral works -
Spoke to my bank re mortgage deferral. Basically this is how it will work:
- Only applies to your principle residence. So if you have investment properties, doesn't apply unless your tenant has lost his/her employment and can't make rent. Will require proof of that.
- It's not a true deferral. Two scenarios available.
The Bank will defer your payments but will add the interest for the deferred period to your mortgage amount on which you will pay additional interest. So basically, think of it as a loan from the bank. The bank is making more money this way and not losing a dime.
The deferred period will increase your amortization period which will mean more interest over the term and this will require a full credit check and assessment from their underwriters. You have a chance of getting denied.
In both scenarios, you must produce proof of loss of income. It will take a few days before deferral can be approved.