Real Estate

Big 6 banks report over 500,000 Mortgage Deferrals

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  • Sep 6th, 2020 10:42 pm
[OP]
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Oct 24, 2009
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Big 6 banks report over 500,000 Mortgage Deferrals

Attached is the article.

An excerpt states that:

"Canada’s Big Six are seeing deferrals expire, and people resume payment on tens of thousands of mortgages. There were 510,530 mortgages on payment deferral at the Big Six at the end of Q3, down 17.53% from the previous quarter. The mortgages are worth $136.27 billion, down 15.38% from Q2. How this number drops is important to understand, since not everyone took a deferral because they needed it."

I'm curious how many of these are actually people who needed the deferral as opposed to just getting it for the sake of having some extra cash around. Anyone know people who took advantage of the deferrals?
12 replies
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Sep 8, 2007
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Way Out of GTA
Same poster. Another bear thread.
"It is in times of great fear or greed that the most opportunity exists."
[OP]
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Oct 24, 2009
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This is a real estate forum. I think mortgage deferrals are real estate related.
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Oct 28, 2018
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cartfan123 wrote: Same poster. Another bear thread.
At least they contributed something useful to the conversation.
Deal Addict
Nov 24, 2013
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Toronto
If interest was still being charged on the deferrals, it makes not sense to defer if you could afford to make payments.

However, I think I read somewhere that some banks were not charging interest on deferrals.
[OP]
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Oct 24, 2009
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lpin14 wrote: If interest was still being charged on the deferrals, it makes not sense to defer if you could afford to make payments.

However, I think I read somewhere that some banks were not charging interest on deferrals.

From the Scotiabank website, it seems like interest is tacked on to the outstanding balance. Excerpt below:

"During the time you defer your mortgage payments, interest will continue to accrue and will be added to your mortgage account balance at the end of the deferral period. This means your payments will be slightly higher after the deferral period ends. You will pay more in interest over the life of your mortgage, but a deferral will also help with short-term cash flow."

But I guess if you're able to use that extra cash and get more of a return in the capital markets, it might make sense for some. I was reading on reddit that some individuals are using the mortgage deferral as an option to even fund home renos.
Deal Guru
Feb 29, 2008
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A lot of people who could easily pay took the deferrals. Just like renters who were able to pay rent but just didn't do it because they had the option not to. This means nothing if you don't know the finances of each "defferer". Look at the amount of people who scammed CERB.

Imagine not having to pay mortgage on 3 properties for 6 months? That's a lot of money to invest. That could work out to $40-50k
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Feb 11, 2009
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lpin14 wrote: If interest was still being charged on the deferrals, it makes not sense to defer if you could afford to make payments.

However, I think I read somewhere that some banks were not charging interest on deferrals.
Not really. If you're paying 2% interest and can earn 4% on that money, why make any payments if you don't have to?
Real Estate Agent, MAcc, CPA, CA
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Mar 9, 2019
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deal_with_singh wrote: Not really. If you're paying 2% interest and can earn 4% on that money, why make any payments if you don't have to?
Because that's risky and in reality there is a possibility for the investment to go the other way also. Markets are so inflated right now, Q3 will be interesting to see how companies are affected.
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urbanshack wrote: Because that's risky and in reality there is a possibility for the investment to go the other way also. Markets are so inflated right now, Q3 will be interesting to see how companies are affected.
Depends on what investment you're talking about. I for instance borrowed a large sum against my home at 2.5% and threw it in a savings account under the Tangerine/PC Lotto at around 3%. Make money, and have it there in case it's needed. (Note: I did not take a deferral, just giving an example of how its beneficial to borrow and hold the money at these rates).

Withdrew the above said money and threw it in CIBC stock when it dropped to $70 and dividend yield was almost 10%. Investment grew, and dividend is there.
Real Estate Agent, MAcc, CPA, CA
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deal_with_singh wrote: Depends on what investment you're talking about. I for instance borrowed a large sum against my home at 2.5% and threw it in a savings account under the Tangerine/PC Lotto at around 3%. Make money, and have it there in case it's needed. (Note: I did not take a deferral, just giving an example of how its beneficial to borrow and hold the money at these rates).

Withdrew the above said money and threw it in CIBC stock when it dropped to $70 and dividend yield was almost 10%. Investment grew, and dividend is there.
Your first comment was stating double your money, but to make .5 % and have to pay taxes on it not really worth it. Second comment is what I mentioned, its risky?? So CIBC's never going to go under $70 is what your saying and dividend will never be cut also? If CIBC drops to $60 for ex. you LOST $10 a share, plus your paying 2.5% on your line of credit. Im just stating the other side of the coin. I wish it was that easy. I know some individuals still holding the bag 12 years later on US banks and there still nowhere nears the peak of 2008.
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urbanshack wrote: Your first comment was stating double your money, but to make .5 % and have to pay taxes on it not really worth it. Second comment is what I mentioned, its risky?? So CIBC's never going to go under $70 is what your saying and dividend will never be cut also? If CIBC drops to $60 for ex. you LOST $10 a share, plus your paying 2.5% on your line of credit. Im just stating the other side of the coin. I wish it was that easy. I know some individuals still holding the bag 12 years later on US banks and there still nowhere nears the peak of 2008.
I didn't say double your money anywhere. 4% is what I said - a pretty common dividend yield in staple stocks like banks and utilities. 0.5% on 100k = $500. 20% tax rate = $400 net in your pocket each year. 2.5% is what I got. Today 1.8% is obtainable, thats 1.2%.

If you think a free $400 after tax a year is not worth also having a "lifeline" of funds available and ready to use at any time, then not sure what to say.

Second comment - everyone has their own risk tolerance, buying CIBC at $70 was not the equivalent of buying TSLA at $2500. Have you seen any canadian bank ever cut their dividend rate, even in the middle of a recession?

If it dropped to $60, sure I lost $10 a share...but I'm still collecting nearly 10% dividend while I wait for it to rise to pay off the 2.5% on my LOC. And today its at $105...so got my 10% yield on dividend and nearly 50% capital growth to pay that 2.5%, I'll take it.

You'll know individuals holding the bag buying TSLA at $2500 in a few years too. Some investments are safe, others not so much, and others like GIC's are guaranteed. It's up to each persons risk threshold to see how much you want to make.

My point was even with no risk tolerance, you would get $400 after tax a year on $100k debt (net of interest). Its a win no matter what, how much of a win is up to your risk tolerance.
Last edited by deal_with_singh on Sep 6th, 2020 11:45 pm, edited 1 time in total.
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Jun 19, 2017
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This Globe article from a few days ago posted some changes commentary on the mortgage deferral cliff

https://www.theglobeandmail.com/investi ... ng-market/

Few things I took note of.

83% of Mortgage Deferrals are from Prime or Super Prime borrowers.

National Bank, CMHC estimate between 5 and 10% of deferrals will result in arrears...translating to .9 to 2% of mortgages.

Interestingly...BoC pessimistic scenario is 0.8% arrears.

Article states very little interest from the banks to extend deferrals beyond Sept. Exceptions may be made for select borrowers only

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