Thinking About Deferring Your Mortgage? Don’t Make This Costly Assumption

The views, thoughts, and opinions expressed are solely those of the author, and information provided is for entertainment purposes (see disclaimer)

As a responsible homeowner, I’ve been researching options in case our income continues to decline during the current economic storm.

Thinking about deferring your mortgage payment? Me too. Here’s what I’ve learned:

The biggest thing to understand is that mortgage deferral or forbearance will help with cashflow now, but you will ultimately owe more later, sometimes much more.

Using RBC’s “Skip A Payment” calculator, I found out that skipping ONE $900 mortgage payment and having our lender add it to the back of our loan would cost us an additional $2117 in interest payments. So “saving” $900 now by not making a payment, will cost us $900 + $2117 in extra interest in the future. 😳

(RBC is not our bank, but I appreciate the cost calculator tool they’ve made available.)

If you can’t pay your bills, mortgage deferral is a POWERFUL TOOL to keep you in your home in the short term, but understand this comes with a sizable cost that will be due later.

Pay attention to the terms. How much interest is accruing? When is the deferred payment(s) due? Some bank are deferring for a few months while others will put the expense on the back of your loan or let you make small additional payments over years.

Deferral Does NOT Equal Free!

If you think it’s just free money or that there won’t be repercussions down the road, please talk to your trusted financial advisors first.

Hopefully this will help you think about the pros and cons of skipping mortgage payments.

*This is not financial advise. I’m sharing my personal experience, and every situation is different. Please discuss any decisions with your financial and legal advisors before taking any actions.*

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