COVID-19 is driving some homeowners to refinance their mortgage. It is estimated that 10.2 per cent plan to refinance in the next 12 months and 9.5 per cent plan to refinance for other reasons, according to a new survey from RATESDOTCA.
Data was collected from 3,500 Canadians aged 18 years or older between August 31 to September 17, 2020. Another recent RATESDOTCA poll by Forum Research Inc. conducted between September 24 and October 1, 2020, surveyed 1179 respondents across Canada and found that one in eight mortgagors say it is “likely” or “somewhat likely” they will not be able to pay their mortgage in the next 12 months, resulting in them having to ask their lender to postpone their mortgage payments.
Homeowners who have been relying on deferral plans due to COVID-related hardship will soon see a large number of deferrals coming to an end in October and November. The amount of people refinancing could increase as a result, but there could also be more resistance from lenders to approve COVID-impacted applicants.
For owners who cannot get approved with a traditional lender, here are RATESDOTCA’s top options to consider:
Talk to a broker: they have dozens of alternative lending options for those with 20 per cent equity or more (in big cities like Toronto, sometimes only 10 per cent equity is required, albeit the rates are much higher).
Use “skip-a-payment”: some lenders allow one monthly payment to be skipped per year. If your deferral didn’t invalidate that option (policies vary by lender), then skipping one additional payment could buy you more time.
Use back-up resources: these options must be considered carefully as they have consequences that may not be palatable, such as negative impact to personal finances and retirement and tax implications. If you have access to low-cost “promotional” credit card cash advances or a secured/unsecured credit line, tapping those can be a short-term bridge until your income is restored. If absolutely necessary to save their home, homeowners with temporary income interruption may have to withdraw from RRSPs to make their mortgage payments.
Worst case, sell: if you can’t keep up with your payments, you’re likely better off selling on your own terms than on your lender’s terms (that’s especially true when home values are strong, like they are right now).
