That is the question.
With so many people being temporarily laid off due to the COVID-19 Pandemic that also triggered an economic crisis, many Canadians are finding themselves in a financial pinch to keep up with expenses and fixed liabilities like mortgage payments, loan payments and credit payments.The Majority of lenders and banks are offering temporary relief with deferred payments on mortgages, loans and credit card payments up to 6 months, of course on a case-by-case basis subject to approval.
Many clients are asking for more resource to help understand the factors involved in whether they should consider a mortgage or other debt payment deferral if they are temporarily out of work and unable to make payments. Others just want to know if they should jump on the opportunity even if they don’t’ really need it.
It is important to understand that borrowing money is not free, when it comes to lending the cost is principal and interest. A deferred payment is not a forgiven payment. Also free money being printed by the government and given to Canadians to help during the economic crisis like the Emergency Response Benefit, will impact us in the future with reduced purchasing power on goods and service, once inflation kicks in after the deflationary period.
Deferred payments on a loan contract that includes interest plus principal will result in interest being accrued. That means the interest gets added to the loan and the loan amount compounds and grows larger.
Deferred payments are only recommend to avoid default.
If you are in financial distress and you are about to default on your mortgage payment, or other loans or debts – contact your lender for special arrangement to avoid default. Once you default it will be reported to your credit and will have a negative impact in the future, resulting in higher interest rate and cost of borrowing in your mortgage payments when you have to renew or change your mortgage in the future.
If you can make your payments normally without deferral, that is definitely the recommenced way to go! Should you experience financial distress, please visit my video blog article FINANCIAL DISTRESS MORTGAGE & FINANCES due to CORONAVIRUS COVID-19 ECONOMIC IMPACT.
Don’t’ hesitate to reach out to us to review your situation, review all the options available to you and help you understand and find the best solutions for your specific financing needs.
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Thanks for your time and keep well!