As government assistance and lender deferral programs come to a close, borrowers are looking for solutions
When the COVID-19 pandemic first hit back in March, Canada’s big banks announced that clients affected by the coronavirus crisis would have the option to defer their mortgage payments for up to six months. Lenders across the country soon followed suit, offering their own mortgage payment deferral programs.
Depending on which plan the borrower entered into, that support has either already ended, or is quickly approaching in September, resulting in many Canadians on the hook for their mortgage payments once again. Despite loosening restrictions across the country and the economy showing signs of recovery, there are still many Canadians left financially strapped.
“For the Canadians fortunate enough to be back at work and collecting full, non-government-backed income, the deferrals would have done what they were designed to do by assisting these Canadians through a difficult time,” said Agostino Tuzi, national partnership director, mortgage brokers at HomeEquity Bank. “The more widespread reality is that as these deferral programs come to an end, these Canadians will have a stark reality to deal with.”
The impact of the COVID-19 crisis and these programs coming to an end is leaving many looking for ways to access cash, whether that means selling their home, refinancing or in some cases dipping into retirement funds. For many people over 55, they could feel pressure to relocate into a family member’s home or downsize to a smaller home in a more remote location.
While downsizing was common in the past, leaving the comfort of their home is the last thing Canadians want to do, especially considering the health risks involved in moving during a health crisis. A more attractive option to consider could be a reverse mortgage.
Tuzi predicts the demand for the ‘ultimate long-term deferral plan’ to pick up significantly in the coming months, as support from the government and financial institutions begins to dwindle, especially for those who already see themselves having problems making the deferred mortgage payments. In fact, that increase in demand is already starting to form. HomeEquity Bank gets between 5,000 and 7,000 inquires every month, according to Tuzi.
“The CHIP Reverse Mortgage is a long-term financial solution that will defer their mortgage payments for life. The stress and anxiety of having to deal with a monthly mortgage payment will no longer be part of their lives. Whether they get back to work in the short or long term or decide to retire, these 55+ Canadians will no longer have to worry about making a mortgage payment again.”
Tuzi adds that brokers play an important role here, as Canadians who feel trapped or desperate are vulnerable to making quick decisions that can hurt them in the long run. He suggests having holistic financial and cash flow conversations, while helping them to identify their present and future needs.
“People are empowered to make good decisions when they have access to accurate information and all possible options,” he said.
For more information on the benefits of a reverse mortgage, reach out to a HomeEquity Bank Business Development manager at www.chipadvisor.ca/bdm for more information.