Tough economic times call for tough solutions. When you can’t make your mortgage payments, you may have to:
refinance your current mortgage
take out a private mortgage to get by
or transfer your home to next of kin.
Before you do that, ask your lender if you can suspend or defer your payments with a mortgage deferral or forbearance agreement.
Deferring During COVID-19
COVID-19 has handed many Ontario homeowners an economic curveball. Fortunately, banks, credit unions and CMHC have been willing to temporarily suspend mortgage payments for up to six months.
You can briefly skip payments while you look for work or get government financial aid. Deferrals give you time to consider if you need to sell, rent or ask your lender to take back your mortgage.
When your financial situation is unlikely to improve, deferrals lets you exercise your options without a mortgage default.
For example, you might:
- borrow back lump sum payments you made in better times
- temporarily reduce your payments
- transfer to a private lender for second mortgages
- blend and extend your mortgage to lower the interest
- convert from variable to a fixed rate to keep payments steady
- increase your amortization to reduce monthly payments
- or live in your home while you sell it.
We have a real estate lawyer (Toronto area or Ottawa) when you need one.
How Mortgage Deferrals Work
Deferring your mortgage means putting your regular payments on hold until you can afford to make your full payments again. Your bank will let you know how long you can suspend your payments.
Make Interest Only Payments
Deferrals allow you to pay interest only and set aside principal payments for a better day.
Payments you defer are added on to your mortgage total and can increase how long it takes you to pay off your mortgage. Your monthly payments may go up if you have to catch up later with missed principal.
You could owe thousands in outstanding principal when your deferral ends. Talk to your lender about extending your mortgage amortization term if paying it down is too expensive right now.
Paying Interest on Interest
Your mortgage lender charges interest every month you defer your mortgage principal. The new interest is added to your normal monthly interest payments. Some lenders will refund “interest on interest” payments when your deferral ends. Ask if yours will.
Who Pays Property Taxes
Depending on how you pay property tax, you may want to ask your lender if they will pick up these expenses temporarily. Your municipality may also defer property taxes if you are suffering financial hardship. These become outstanding debts when you resume your property tax payments.
Who Can Defer Mortgages
You may qualify if:
- you, your spouse or partner are unemployed,
- or your family’s income declined because of illness, reduced work hours or unemployment,
- and your mortgage is in good standing,
- whether you live in your home or own and rent it.
Cancel or Repay Deferrals
If your fortunes improve, you could cancel your deferral early and resume your regular mortgage payments. That reduces extra interest you owe to defer your mortgage. You could also repay the deferred amount in a lump sum, without a penalty. That allows you to continue on with your regular mortgage terms, instead of making higher payments or extending the amortization.
Using Disability or Credit Insurance
Don’t want to defer? Disability or credit insurance can tide you over when you are temporarily disabled or unemployed.
Provided you’re in good health, under 65 to 70 (depending on your policy) and have kept up with your debts until now, insurance can help you make payments that could otherwise be unmanageable.
How to Buy It
You can buy private insurance, include it in your extended benefits at work or add it to a mortgage. Disability or credit insurance make mortgage or rent payments and pay basic living expenses if you lose a job through no fault of your own.
When its Effective
An accident or illness that prevents you from working, layoffs, legal strikes or being let go without cause can trigger your insurance.
Check your policy for benefits periods. Single premium policies are paid in full when you purchase insurance. Otherwise, you may have to negotiate with your lender to temporarily delay the monthly premiums.
Why You Need a Lawyer
If you’re refinancing a mortgage or starting over with private mortgages, we have licensed real estate lawyers near you who can close your transaction. Axess Law completes most mortgage discharges in less than a week.
Access lawyers in Greater Toronto Area and Ottawa to discharge existing mortgages and communicate with your bank to finalize your new or blended mortgage. We add new lenders and update the title to your property to make it legally valid.
Ask your mortgage lender or broker if they pay or reimburse legal fees. You could get mortgage assignment fees and discharge costs covered in part or full when you change lenders to get more favourable loan terms.
Questions about mortgage prepayment penalties you owe or administrative fees in mortgage documents? Our real estate lawyer services keep you informed every step of the way.
Mortgage Lawyers for Flat Fee Legal Services
Axess Law has cheap lawyers when you need flat fee legal services to refinance a mortgage or take out a new one. Refinancing mortgages costs just $799.99 and up plus HST. You can transfer title to a property anywhere in Ontario for only $699.99 plus HST.
Use our easy online booking form to make your appointment — it takes only minutes and we’re open 7 days a week, at times convenient for you. Make day or evening appointments, whatever fits your schedule best.
Call our 1-647-479-0118 lawyer line (toll free to 1-877-402-4277) to meet at any of our Axess Law locations in Greater Toronto Area or Ottawa. We video conference online and witness your signature using secure, remote signing software.