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All You Need To Know About Mortgage Deferral



If you ever find yourself in a position of not being able to pay your mortgages on time or are undergoing some financial crunch you are in luck because you have the option of mortgage deferral. Mortgage deferral simply refers to a delay in a mortgage payment for a specific period of time. A mortgage deferral is executed in the form of an agreement signed between you and your lender. 


When the specified period of mortgage deferral ends, you would be required to begin making your mortgage payments on a regular basis again. You would additionally have to pay the number of mortgage payments you deferred by invoking the mortgage deferral agreement. But the manner in which you will be making these deferred payments depends on your lender or lending institution as they decide how they want these payments.


Following are some methods in which you can be expected to make your mortgage deferral payments:

  •   Deferred payments can be added to the mortgage balance at the end of your mortgage term

  •   Extension of the mortgage amortization period

  •   The regular payment amount can be increased when the deferral period is over

Mortgage deferral, of course, comes with some terms and conditions. The lender will continue charging interest on the loan amount during the deferral period and also add the total interest due to your outstanding mortgage balance.


Eligibility for mortgage deferral


The lenders decide whether or not to go in for a mortgage deferral agreement depending on individual cases as for them it is purely a business decision. Some criteria for eligibility can be:

  •   If you have an insured or uninsured mortgage

  •   If your home if your main residence or not

  • Unemployment due to the Covid-19 pandemic

  • Lowered income or pay cuts due to the Covid-19 pandemic

 What is the impact of deferred payments?


The principal amount of money borrowed remains the same but the interest gets added to it for the period for which the payment is deferred. The interest payments which you miss get added to the mortgage principal amount at the end of the mortgage deferral period.


So when you resume your payments to your lender the interest you need to pay will be on the principal amount in addition to the deferred interest. A word of advice: You could approach your lender and ask for a refund of the interest on the interest if there is scope for them to do so.


If your lender is paying your property taxes, then the payment for the same is part of your mortgage. So you ask them, the lender can also allow you to defer your property tax payments. But in case you are making these payments yourself, you may have to continue doing so or contact your municipal office if payments are not possible due to unaffordability.


There are many other aspects of mortgage deferral which you may want to know about. We will address them soon. Till then, you can mail us any queries or doubts you have about mortgage deferrals and we will be happy to help.

 

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