At Mortgage Hotspot, I understand the concerns relating to Covid-19. Many individuals have been undergoing financial hardship during the pandemic due to loss of income, family illness,
declining investments and many other reasons. As for many homeowners, you may be seeking financial advice or information relating to your mortgage and financing during this crucial time.
I’d be happy to devise a plan to suit your needs.
COVID-19: Managing financial health in challenging times
Getting through a financial emergency
Financial emergencies can happen to anyone and come at any time. They can be the result of family illness, job loss, urgent home repairs, or a weather event like a major flood. Some events could even shut down your community for an extended period.
You may be worried about the impact of the current COVID-19 pandemic on your finances. Whatever the source, financial emergencies can be stressful and cause considerable hardships for you and your family.
When sudden events occur, it may not always be immediately noticeable that you are heading towards financial hardship. A long-term assessment of your capacity to maintain your current lifestyle is important. Consider any impacts on your income, grocery bills, housing, utilities and other necessities that still need to be paid.
Emotional situations can lead to poor financial decisions. Be sure to get the help you need with financial decisions during an emergency. Take the time to get advice and information on what you would like to do.
The Financial Consumer Agency of Canada (FCAC) has many educational resources on budgeting, credit, savings, debt management and more. Interactive tools and calculators can also help you maintain good financial health during these challenging times.
What is the Government of Canada doing to help
The Government of Canada is taking action to help Canadians manage their finances during this exceptional period.
Your taxes
The Canada Revenue Agency (CRA) deferred the filing and payment due dates for the 2019 income taxes of individuals. This will provide flexibility to Canadians who may be experiencing hardships during the COVID-19.
Your income
Many employees are unemployed due to shortage of work because of closed or decreased operations due to COVID-19. If that is your case and you qualify for Employment Insurance benefits (EI), you can apply for EI.
The Canada Emergency Response Benefit (CERB) has ended but CRA is still accepting retroactive applications until December 2, 2020.
Whether or not you received the CERB, you may be eligible for one of the new recovery benefits. These new benefits are retroactive to September 27, 2020 and available until September 25, 2021.
Your family benefits
The Canada Child Benefit (CCB) has been increased to an extra $300 per child. This benefit will be delivered as part of the scheduled payment in May. Those who already receive the benefit don’t need to re-apply.
Your student loan
Effective March 30, 2020, all student loan borrowers will automatically have their repayments suspended until September 30, 2020. During this time, you won’t have to make any payments and interest will not accrue. You do not need to apply for the pause on repayment.
Receiving money from the Government
The fastest way to receive benefits and tax refunds from the Government of Canada is to create an account with the Canada Revenue Agency (CRA) and sign up for direct deposit. Some financial institutions allow you to set up direct deposit through their online banking services and mobile application. Direct deposit is fast, convenient, secure and allows consumers to immediately access the full amount deposited.
Cashing your emergency benefits-related cheque
The Government of Canada has temporarily increased the cheque-cashing limit to $2,000 for emergency benefits-related cheques to individuals.
Cashing a Government of Canada cheque
If you’re still receiving benefits by Government of Canada cheque, you may cash your cheque for free. Usually, you can cash a cheque that is $1,500 or less, at any bank even if you’re not a customer. However, the Government has temporarily increased the limit to $2,000 for emergency benefits-related cheques to individuals, such as CRB. You must simply show acceptable identification to the teller such as a passport or driver’s licence.
Depositing a cheque with your mobile device
You can also deposit your cheque in person at any bank branch, using an ATM or by mobile device. However, the bank will put a hold on the money. Depending on the amount, you may have to wait between 5 and 8 business days before accessing the money.
Costs of payday loans
If you’re thinking about using a payday loan company or cheque-cashing outlet, this will cost you money. These companies usually charge a percentage of the amount that is being deposited plus a flat fee. For example, if you cash a $1,000 cheque, you could be charged 2.99% of the value of the cheque, plus $2.99 for each item you cash. This means that after fees, you’d only get about $967 instead of the full $1,000.
What to do if you’re facing financial hardship
You may be facing financial hardship as a result of the COVID-19 outbreak. Be prepared. If you think the current pandemic may put you in financial hardship, here are some steps you can take.
Your expenses
If you’re having trouble paying for your ongoing expenses or foresee challenges in keeping up with your regular payments, visit your financial institution’s website. Be proactive and look at the options that your financial institution is proposing.
Banks in Canada are closely monitoring developments related to COVID-19. If you’re facing short-term financial issues, your bank might be able to help. Some banks have announced measures that include the opportunity for relief on certain credit products. Other banks might be open to waive certain fees or delay payments.
Note that some banks have additional measures in place to support seniors and people with disabilities. These measures may include flexible hours of operation, prioritization in the queue and assistance with certain transactions.
Understanding a mortgage deferral
If you’re having problems making your mortgage payments because of the COVID-19 situation, you might be eligible for a mortgage deferral.
Mortgage deferral
A mortgage deferral allows you to pause your mortgage payments for a defined period of time. Interest will continue to be charged on the amount you owe and will be added to your balance. When the deferral period ends, you have to resume your payments.
Your financial institution determines how you repay the skipped payments and interest. For example, your financial institution may add the skipped payments and interest to your regular payments once they resume. This means your payments could be higher than before the deferral period. As an alternative, your financial institution may ask you to pay the deferred payment amount and interest at the end of your mortgage term. Make sure you understand your financial institution’s mortgage deferral terms and conditions.
Note that mortgage payment deferrals typically focus solely on your mortgage. It may not affect other payments regularly withdrawn, like property taxes and optional credit insurance.
If you have emergency savings, you may want to consider using them before considering a mortgage deferral.
How to apply for a mortgage deferral
Visit your financial institution’s website for the latest information on mortgage deferrals. If you decide to use this option, ask your financial institution about the costs and terms and whether this can impact your credit report.
If your mortgage is insured with the Canada Mortgage and Housing Corporation (CMHC), you can contact a mortgage professional for assistance. They can determine what options you have and help you find a solution for your specific situation.
Mortgage relief options
If you expect to continue to experience financial hardship once your mortgage deferral period ends, consider your options now.
Read your mortgage contract and speak to your financial institution about the options available to you. You may be eligible for one, or a combination of the options offered by your financial institution. Keep in mind that if you make changes to your mortgage contract, you may have to pay fees.
Financial institutions look at situations on a case-by-case basis.
Impact of payment deferrals on your credit report and score
During the COVID-19 pandemic, many financial institutions allow the deferral of payments on credit products, including mortgages and credit cards. Financial institutions approve payment deferrals on a case-by-case basis.
Deferring payments on a mortgage, credit card or any other credit product should not negatively affect your credit. Canada’s two credit bureaus, Equifax and TransUnion confirmed that payment deferrals won’t affect your credit rating.
Review your credit reports. Make sure the deferrals approved by your financial institution have been properly reported to the credit bureaus. It could take up to one month for information to appear on your credit reports.
You can order your credit report with Equifax and TransUnion, free of charge at any time.
When reviewing your Equifax credit report, look for one of the following indicators next to your deferred payments:
- deferred payment plan
- affected by a natural or declared disaster
The payment status should be “Paid as agreed and up to date” and you should see the amount of $0 or “n/a” in the “Payment Amount and Delay” field.
For TransUnion, look for the letter “D” in the “Terms” field related to the deferred payment.
Getting money from your home equity line of credit (HELOC)
A HELOC could potentially be a good replacement for emergency savings, under certain circumstances.
Lowering your credit card interest rates
Many Canadian banks are offering consumers who are experiencing financial hardship as a result of COVID-19 the possibility of temporarily reducing the interest rate on their credit cards. Many also offer deferred payments for a period of up to six months.
Terms and interest rates may vary depending on the financial institution. Contact your financial institution by using its online portal, telephone banking service or by booking an appointment to determine if you are eligible. Otherwise, your monthly payments and interest rates will remain the same.
Bank charges, debit and credit transactions and monthly fees
The Bank of Canada strongly advocates that retailers continue to accept cash. However, some consumers and businesses have stopped using cash to limit potential exposure to COVID-19.
If you’re using your debit card more frequently to avoid cash transactions, review your monthly transaction plan. Be aware that if you go over the number of transactions in your monthly plan, you may have to pay fees.
Several payment card network operators have increased their per-transaction limits for contactless credit transactions since the start of the pandemic. Contact your credit card issuer to find out if your limit has changed.
Debit and credit card transactions can be done using the:
- magnetic swipe and your pin
- chip and your pin
- secured TAP payment
If you are being affected by the pandemic and need assistance, you may be able to get a refund on certain bank charges.
These can include fees for:
- insufficient funds (NSF)
- stop payments
- Interac e-transfers
- monthly transaction plans
Avoiding more debt
During this uncertain period, try to avoid borrowing additional money as much as possible. Research shows those who often use credit to pay for daily expenses because they have run short of money have lower levels of financial well-being.
If you must borrow money, make sure you understand the cost of different credit products before you make a decision, and borrow only what you need.
Certain credit products are more expensive than others due to their high interest rates and fees. For example, a payday loan should be your absolute last resort, as they often carry very high fees.
Make sure you compare all borrowing options and their fees, interest rates and repayment terms before choosing a credit product. Otherwise, contracting new expensive credit now could create more financial problems for you in the future.
Getting help
If you are having trouble making ends meet, seek advice from reputable sources to explore the financial options that are available to you. You can contact a financial professional, such as a licensed financial advisor or an accredited credit counsellor, to discuss a plan. If you choose a financial advisor, make sure they are licensed.
Be cautious when searching for the right professional who can help you. Some companies offering to help to pay off debt or repair credit are misleading consumers.
Budgeting in times of uncertainty
Having a budget is key, especially when an emergency occurs. In order to manage your budget, you need to identify your income and expenses. It’s also important to identify your needs versus your wants during a specific period.
The Budget Planner is an interactive tool that provides tips, suggestions, guidelines and alerts. It can help you determine whether you have the funds to meet your ongoing financial commitments and where you could cut expenses.
Having and maintaining an emergency fund
An emergency fund is money you set aside to pay for unexpected expenses. In general, it’s recommended that you save the equivalent of 3 to 6 months of your regular expenses.
If you don’t currently have an emergency fund, consider putting some money aside right now if you can afford it. Depending on how the situation evolves, you may need to rely on an emergency fund sooner than expected.
If you’re already experiencing financial hardship and can’t afford to start or maintain an emergency fund, contact your financial institution. They could recommend specific products or services, like a HELOC, a debt management plan or accessing funds in your registered retirement savings plan (RRSP), to help you get through these difficult times.
Where to ask questions or voice concerns
If you have questions or concerns about the impact of these difficult times on your bank account, your savings or your credit products, contact your financial institution. Make sure you have the contact information to get in touch with your financial institution.
FCAC welcomes your inquiries. You can communicate with us by email, mail or telephone. You can also contact us if you have a complaint about a federally regulated financial institution.
What to do if your branch closes
Your financial institution might have to close branches temporarily. Online, mobile, ATM or telephone banking may become necessary for making financial transactions. Make sure you have your login information and passwords or your financial institution’s phone number handy.
If you usually go in branch to pay your bills, consider setting up pre-authorized debits instead. Pre-authorized debits are automatic and convenient when you want to make payments from your account on a regular basis.
You might notice that some consumers and businesses have stopped using cash to limit potential exposure to COVID-19. However, the Bank of Canada strongly advocates that retailers continue to accept cash. This will ensure that all consumers have access to the goods and services they need.
Protect yourself from financial fraud
You should always protect yourself from financial fraud, especially during a period of uncertainty. Unfortunately, fraudsters will prey on consumers’ fears and misinformation over the COVID-19 pandemic. You may get phone calls, emails and texts regarding the COVID-19. Be very cautious when receiving them.
Tips to protect yourself from financial fraud
- never click on links or attachments in unsolicited or suspicious emails
- never give out your personal or financial information by email or text
- note that financial institutions will never ask you to provide personal, login or account information by text or email
- when banking online, enter your financial institution’s website address in your browser yourself
- beware of questionable offers related to cures, if it seems too good to be true, it probably is
- if you have concerns about your insurance coverage, contact your insurance company directly
- if you need information on the COVID-19, refer to a trusted source such as the Government of Canada’s COVID-19 page
Find more information about COVID-19 fraud and scams
Remember that if you didn’t initiate contact with a person or a business, you don’t know who you are dealing with.
The Canadian Anti-fraud Centre has more information on scams and tips related to COVID-19 to help protect yourself from fraud.
COVID-19: Measures for self-employed workers
Numerous self-employed workers have been affected because of the current situation. Many of them have seen their orders dwindle in the last few weeks. If you’re a self-employed worker who’s been affected by the situation, know that there are many measures and programs set up by governments and financial institutions that are available for self-employed workers. Here’s our advice and our suggestions to get through this unusual time.
1. Take advantage of this time to update your invoices
“When self-employed workers are swamped, accounting and invoicing are often what get pushed to the side,” reveals Martin Cinq-Mars, senior advisor, commercial banking sales effectiveness at National Bank. “It’s important to invoice all the clients you’ve worked for to maximize your cash inflow.”
We also suggest following up with clients who have unpaid invoices. “But be careful – you need to be understanding,” warns Martin Cinq-Mars. “Your customers are in the same situation as you are. Suggest getting paid by credit card, if possible. That way, you’ll get paid and they’ll have an additional delay to pay off the amount.”
2. Take advantage of relief provisions and payment deferrals
Financial institutions and government bodies have set up various relief provisions to alleviate the current crisis. Visit the National Bank’s website to learn more about the options at your disposal. For example, you may be able to defer one or several of your mortgages, increase your credit limit, reduce your credit interest rate, or apply for a line of credit.
Do you rent? Try to strike a deal with your landlord. While there aren’t any measures forcing them to accept payment deferrals, some may be more understanding than you think, especially if they’re taking advantage of mortgage payment deferrals themselves.
The City of Montreal has also announced that they’re postponing the deadline for the second installment of municipal taxes by a month (the deadline is now July 2). Other service providers like Hydro-Québec are also willing to accept a payment agreement if you contact them.
Please note that you can also defer the GST/HST and QST payments that were due on March 27 to June 30, regardless of whether your payments are monthly or quarterly. But beware: the deadline for reporting your QST and GST/HST remains the same.
Do you expect having to pay taxes? Postpone sending in your income tax returns to the end of May, as the new deadline is now June 1. If you have to pay anything off, the new deadline for this is September 1. However, if you’re sure you’ll receive a reimbursement, don’t wait – send your income tax returns as soon as possible.
3. Clearly define your status before taking a look at the assistance programs
The definition of “self-employed worker” varies from one organization to another. “Do you work from home on your own? Do you have some people on a payroll? These are excellent questions to ask yourself before poring over the governments programs one by one,” Martin Cinq-Mars adds.
Why? “Because if you work from home on your own, you’ll probably be eligible for programs offered for individuals. If you have workers on your payroll, you may be eligible for assistance programs aimed at SMBs.”
Here’s another very important question: are you a self-employed worker who contributes to employment insurance? “Some do, but it isn’t mandatory. If you do, you could qualify for employment insurance.”
4. Examine all the available measures and submit applications
The provincial and federal governments are working to set up various assistance programs, like the Government of Canada’s Canada Emergency Response Benefit. This assistance program grants all workers who have lost their employment income or self-employment income due to COVID-19 $2,000 every 4 weeks, for a maximum of 16 weeks. “Take the time to carefully read the eligibility conditions and keep up with daily government press conferences. The eligibility criteria may quickly change to allow more workers to take advantage of programs,” Martin Cinq-Mars advises.
Quebec’s Temporary Aid for Workers Program is another option that may be at your disposal. Self-employed workers are eligible for this program. This measure is for any worker who cannot collect their full salary due to mandatory isolation (positive diagnosis, recent travel, or contact with an infected person). This program grants $573 per week for a maximum of four weeks.
5. Think about the future, seize opportunities, and communicate
As the current situation may persist and change the way people work, it’s important to think about the future as of right now. “Communicate and make yourself known. Offer your services on social media. You could help organizations that are going through difficult times themselves. They may turn into new clients once circumstances improve.”