This is a unique time…
With the pandemic from COVID 19 causing disruption to the economy and our daily lives, most lenders have stepped up and offered 6-month mortgage payment deferment programs on a case-by-case basis.
Before deciding on taking a mortgage payment deferral, I wanted to show you the good and the bad of mortgage payment deferral. Let’ talk about the bad first!
The BAD
Lenders have yet to confirm if the 6 months mortgage payment deferral offers will be interest-free or not. If it is not interest-free, your mortgage balance can add up quickly!
Assume the following:
- mortgage balance: $442,800
- mortgage payment: $2,050/m ($1,023 principal + $1,027 interest)
By deferring 6 months of payments, the principal portion is not paid down and the interest portion is added onto your balance. Here are the results after 6 months.
- MORTGAGE BALANCE (no payment deferral): $437,600
- MORTGAGE BALANCE (with payment deferral): $449,000
That is a difference of $11,400 in your mortgage balance after 6 months!
Please note, the calculations are estimates and rounded. The intention is to provide you with an idea of the impact payment deferral can have on your mortgage balance.
The GOOD
Mortgage payment deferral is a common program from lenders – but deferral for 6 months is unheard of! Here are the good with payment deferral:
- use your extra cash to spend on essentials (ex: grocery)
- avoid defaulting and losing your home
Personally, the two reasons above do justify taking the mortgage payment deferral. However, if you have the cash flow to maintain your mortgage payments, you will be better off in the long run.
Stay safe everyone.
Andy Wai, Mortgage Specialist
DLC Clear Trust Mortgages
Tel: 778-323-9449
Email: Andy.wai.mtg@gmail.com