Real Estate

Mortgage deferral impact on credit?

  • Last Updated:
  • Apr 13th, 2020 5:09 pm
[OP]
Jr. Member
Jan 22, 2015
139 posts
14 upvotes
Toronto

Mortgage deferral impact on credit?

Folks, does anyone known if mortgage deferral on 1 or many properties will impact credit rating internally (banks) or on credit bureau?
7 replies
Newbie
May 23, 2016
40 posts
45 upvotes
Historically no except whatever rating is impacted by outstanding balance. However, there is no guarantee that credit bureaus or banks would not add this as an additional risk variable in the future for people who use it now.

If you need to use it, you don't need to worry about credit rating impact as long as you can pay when the period is up.
Sr. Member
User avatar
May 2, 2006
853 posts
182 upvotes
hammadarif wrote: Folks, does anyone known if mortgage deferral on 1 or many properties will impact credit rating internally (banks) or on credit bureau?
TD confirmed "no"
Deal Guru
Feb 22, 2011
10124 posts
12522 upvotes
Toronto
hammadarif wrote: Folks, does anyone known if mortgage deferral on 1 or many properties will impact credit rating internally (banks) or on credit bureau?
It does not impact your credit.
Deal Addict
Jan 15, 2017
3897 posts
3354 upvotes
It is really too early to know.

There are multiple ways that a mortgage deferral can affect your overall credit. A mortgage deferral can be coded for instance so it doesn't show as missed payments on your credit report so there will be no impact for missed payments.

But, many banks and lenders are simply adding the outstanding interest at the end of the mortgage deferral term to your overall mortgage balance with the result being your mortgage balance will increase. An increase in your overall debt load can affect your overall credit rating and score. (see CIBC's post here: https://www.cibc.com/en/personal-bankin ... f-faq.html).

During mortgage renewals, many lenders will look at your payment history when deciding whether to automatically renew. If, for instance, you have a history of being a slow payer and now have deferred payments on your payment history who knows what decision a mortgage lender may make down the road when it comes time for your mortgage to renew.

And that is important to keep in mind. We can all look back and state what mortgage lenders have done in the past, but none of us know what may happen in the future. None of us know what the ultimate impact of 10% of mortgage holders seeking mortgage deferrals will be. Are a certain percentage of these, for instance, actually at the beginning of the default and foreclosure process? We won't know the answer to that for most likely another 9-12 months.

But one thing is clear - when you request a mortgage deferral it is because you are having difficulty meeting your financial obligation. If you were a mortgage lender, do you really think that this would not have any impact whatsoever, across the board, with everyone requesting deferrals?
Last edited by skeet50 on Apr 12th, 2020 4:18 pm, edited 1 time in total.
Newbie
Aug 7, 2003
97 posts
22 upvotes
Can someone please breakdown the financial impact of a deferral. I'm still on the fence on applying, I would prefer to have more cash on hand during these times if the cost is minimal.
Deal Addict
Jan 15, 2017
3897 posts
3354 upvotes
harveer wrote: Can someone please breakdown the financial impact of a deferral. I'm still on the fence on applying, I would prefer to have more cash on hand during these times if the cost is minimal.
You need to go to your mortgage lender's website and read whatever examples and information that they have and see how it affects you with your current mortgage balance, rate and amortization. Whether the cost is minimal or not depends on what you consider to be a minimal cost. Is potentially thousands of dollars in extra interest minimal to you?
Banned
Oct 23, 2018
85 posts
54 upvotes
That period being, what, 6 months? And then what?

Recipe for disaster this whole thing...

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