Mortgage payment deferrals
Think twice before extending your amortization to lower your payments. The interest costs that you’ll need to pay will be higher. This may add up to thousands or tens of thousands of dollars.
Contact your financial institution to discuss your options.
Use the Mortgage Calculator to estimate your payment amounts and interest costs.
What is a mortgage payment deferral
A mortgage payment deferral is a temporary mortgage relief measure. It may help you in the short term if you’re experiencing financial difficulties.
With a mortgage payment deferral, you enter into an agreement with your financial institution. This agreement allows you to delay your mortgage payments for a specific period, usually up to 4 months.
After the deferral period ends, you resume making your mortgage payments. You’ll need to repay the mortgage payments you defer.
As a result, after the deferral period:
- you’ll owe more money on your mortgage than before the deferral period
- your mortgage payment amount may be higher
- your amortization, the length it takes to pay off your mortgage, may be longer
Deferring your mortgage payments may end up costing thousands of dollars over the life of your mortgage.
Federally regulated financial institutions, like banks, are expected to provide you with information about these costs. They're expected to do so before you get a mortgage deferral. If you expect to continue to experience financial difficulties once your deferral period ends, consider your options now.
Contact your financial institution to discuss mortgage relief measures that may be available to you.
Learn more about mortgage relief measures.
Getting a mortgage payment deferral
Contact your financial institution if you’re experiencing financial difficulties and think you may be at risk of mortgage default. Federally regulated financial institutions, like banks, are expected to work with you to find an appropriate mortgage relief measure.
You may be able to get a mortgage payment deferral if all the following conditions apply to you:
- your mortgage is up to date and in good standing
- your mortgage is on your principal residence
- you’re facing financial difficulties due to exceptional circumstances
- you’re at risk of mortgage default
Learn more about paying for your mortgage when experiencing financial difficulties.
Deferring your mortgage payments
Your mortgage payments include the principal and the interest. They may also include your property tax payments and fees for optional insurance products.
Deferring your mortgage payments may have an impact on each of these elements.
Principal
The principal is the amount of money you borrow from a financial institution. With a mortgage payment deferral, you don’t pay the principal. Instead, you’re delaying the payment of this amount.
Interest
The interest is the cost you pay to borrow money from a financial institution.
To calculate your interest costs, your financial institution uses:
- your interest rate
- your mortgage principal amount
- the time left to pay your mortgage
When you defer your mortgage payments, your financial institution continues to charge interest on your mortgage principal. You don’t pay the interest portion of your mortgage payment during the deferral period. Like the principal, the interest is deferred.
Your financial institution adds the deferred interest costs to your mortgage principal. They usually add this amount at the end of the deferral period.
Interest on interest
After the deferral period ends, your principal is higher because it includes your deferred interest. You pay interest on the principal. The interest on the deferred interest portion of the principal is called interest on interest.
With a mortgage deferral, federally regulated financial institutions, like banks, are expected not to charge you interest on the deferred interest.
Learn more about interest on mortgages.
Property taxes
You may pay your property taxes through your financial institution. This may be a requirement of your mortgage contract, or an option you selected. When this is the case, your mortgage payments typically include your property tax amount.
Your financial institution may allow you to defer your property tax payments. If they don’t, you need to continue to pay the property tax portion of your mortgage payments.
Some municipalities offer property tax deferral programs. If you can’t afford your property taxes, contact your municipal office.
Optional credit insurance
You may have purchased optional credit insurance. When this is the case, your financial institution includes the credit insurance in your mortgage payments. You’ll likely need to continue to pay the credit insurance portion of your mortgage payments.
If you can’t afford your credit insurance, contact your financial institution.
What to expect when you defer your mortgage
Your mortgage payments include the principal and the interest. It may also include your property tax payments and fees for optional insurance products. Deferring your mortgage payments can have an impact on each of these financial commitments.
Principal
The principal is the amount of money you borrow from a financial institution. With a mortgage deferral, you don’t pay the principal. Instead, you are delaying the payment of this amount. For example, assume you owe $300,000 in principal at the beginning of the deferral period. At the end of the deferral period, you will still owe $300,000, plus interest.
Interest
The interest is the cost you pay to borrow money from a financial institution.
To calculate your interest costs, your financial institution uses:
- your interest rate
- your mortgage principal amount
- the time left to pay your mortgage (your amortization)
When you defer your mortgage payments, your financial institution continues to charge interest on the amount you owe. Your financial institution adds the missed interest payments to your mortgage principal. They add this amount at the end of the deferral period, or each time a mortgage payment is due.
You pay interest on the principal. When you defer your mortgage payments, you pay interest on the new principal amount, which includes the deferred interest. The interest on the deferred interest is called interest on interest. Some financial institutions may agree to refund the interest on interest depending on your situation. If your financial institution calculates interest on interest during the deferral period, ask them if a refund is available.
In either case, your mortgage principal will be higher than before the deferral period. This means you pay more interest over the life of your mortgage. This amount can add up to thousands of dollars over the life of your mortgage.
Property taxes
You may pay your property taxes through your financial institution. This can be a requirement of your mortgage contract, or an option you selected. When your financial institution makes your property tax payments on your behalf, the amount is part of your mortgage payments.
Your financial institution may allow you to defer your property tax payments. If they don’t, you have to continue to pay the property tax portion of your mortgage payments.
Some municipalities offer property tax deferral programs. If you can’t afford your property taxes, contact your municipal office.
Optional credit insurance
You may have opted to buy optional credit insurance. When that’s the case, your financial institution includes the credit insurance fee in your mortgage payments.
Your financial institution may allow you to defer your credit insurance payments. If they don’t, you have to continue to pay the credit insurance portion of your mortgage payments. If you can’t afford your credit insurance, talk to your financial institution.
Repaying your deferred payments
After your mortgage payment deferral period ends, your financial institution will recover the amounts you deferred.
This includes the deferred:
- principal
- interest
- property taxes, if applicable
- optional credit insurance, if applicable
The total amount may add up to thousands of dollars.
Your financial institution determines how you repay this amount.
For example, they may:
- extend your mortgage amortization
- increase your regular payment amount after the deferral period is over
- increase your regular payment amount when you renew your mortgage
This means your regular mortgage payments may be higher, depending on how you need to repay the deferred payments.
If your financial situation has improved, consider repaying your deferred amounts as soon as you can. Many financial institutions allow you to repay the deferred amounts without paying a penalty.
If that is the case, you may lower the cost of additional interest by:
- increasing your payments after the deferral
- making a lump-sum payment
Learn more about paying off your mortgage faster.
Cancelling your mortgage payment deferral early
You may wish to cancel your mortgage payment deferral before the end of the deferral period. This may be the case if you’re no longer experiencing financial difficulties or if your financial situation has changed.
Cancelling your mortgage payment deferral early may help you reduce the additional interest costs resulting from the deferral.
Some financial institutions allow the cancellation, others don’t. Contact your financial institution for more information on cancelling your mortgage deferral early.
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