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Should you defer your mortgage and loan payments?


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When a crisis like COVID-19 hits and you need help managing your finances, one of your options is to defer a payment for mortgages and loans, like Meridian’s skip a payment feature. To help you determine whether deferring a payment is right for you, here’s an overview of how skip a payment works, who’s eligible, and other financial relief options you can look into for more support.

What is skip a payment?

Skip a payment is a feature that lets you defer a mortgage or loan payment if you’re having financial difficulties. You don’t subtract the payment from the total you owe, you just put off the payment until later. Here’s how it works:

  • When you request to skip a payment (it’s possible to skip up to six payments if you’re eligible) you don’t make a mortgage or loan payment during that payment period.

  • Interest continues to accrue on your principal balance during this time, but it isn’t added to the balance.

  • Once you start making payments again they go toward paying off the interest accrued while you were deferring payment.

  • When you’ve repaid the accrued interest, your payments start reducing your principal and interest, as usual.

Remember: Paying off your debt is always going to be better for your finances overall, so if you can make your current mortgage or loan payment, do it. You should only skip a payment if a crisis or emergency has made it difficult to keep up with your mortgage or loan.

If I defer a payment will I have to pay interest-on-interest?

You might have heard the term “interest-on-interest” in the news recently when people talk about the negative consequences of deferring payments with some of Canada’s big banks. Here’s what it means: With some banks, deferring a payment on your mortgage or loan means that the accrued interest will be added to your principal balance. So your principal balance increases, and since you’re not paying it down while you defer payments, your interest increases too. This interest-on-top-of-interest can cost you in the long-run, which is unhelpful if you’re already struggling financially.

But here’s the good news! Meridian doesn’t charge interest-on-interest. We don’t add the interest you accrue to your principal balance, making it easier for you to get your payments back on track when you stop deferring.

Are you eligible for skip a payment?

You can only make one skip a payment request at a time, for a maximum of two months. Beyond that, you need to make another request.

To defer up to two monthly payments, you must meet these conditions:

  • Your mortgage or loan is in good standing or delinquent less than 30 days.

  • You are at least 60 days away from your mortgage or loan’s maturity date.

  • If you make payments for your mortgage or loan using an account from a different bank or credit union, there are at least five business days between your skip a payment request and your next payment due date. Looking to make payments simpler by switching to a Meridian chequing account? We can help with that.

To defer up to four more monthly payments, Meridian requires you to confirm that:

  • Your skip a payment request is related to the financial impacts of COVID-19 (such as self-isolation, illness, income disruption, or caring for others) and indicated on your request.

  • Your 2019 property taxes are up to date (for mortgage payments). If your property taxes are included in your mortgage payment you must continue to pay them even if you defer the mortgage payment.

  • You have home insurance. (for mortgage payments)

Other options for financial help

Deferring a payment isn’t your only option for financial relief during a crisis. Meridian has other solutions you can take advantage of in addition, or instead of, skip a payment. These include:

  • Talk to a mortgage advisor about extending your amortization period if you’ve made accelerated payments or any prepayments on your mortgage.

  • If you have loss of employment insurance, use that to cover your monthly mortgage payments.

  • Look into deferring your minimum monthly credit card payment.

Reach out to us for advice on any of these options - we can create a customized plan just for you.

There are also several government programs you can benefit from:

  • Canada Emergency Response Benefit (CERB): Temporary income support to workers who have stopped working due to COVID-19.

  • Canada Child Benefit (CCB): One-time increase to the May 2020 CCB payment for the 2019 to 2020 benefit year (July 2019 to June 2020).

  • Canada Emergency Student Benefit (CESB): Financial support for post-secondary students and recent graduates during COVID-19.

  • Support for Families (Ontario): Financial support for Ontario families with children who are not in school or childcare because of COVID-19.

 

Want to stay up-to-date on information and support related to COVID-19? We post all updates and news on our COVID-19 Response Page

 

We’re here to help

If you need help with your finances, or you have any questions about skipping payments or applying for government programs, please call us. Helping you is our job - you’re not alone.

Call our Contact Centre at 1-866-592-2226

To skip a payment, call 1-833-754-0045 (Open 8 a.m. to 6 p.m. Monday to Friday)

Get in touch with a Meridian advisor

 

Learn more about managing your finances during COVID-19

8 tips on managing your money during a crisis

Your investments and COVID-19: What you need to know

Protect yourself from frauds and scams related to COVID-19

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