Mortgage relief programs for Canadian homeowners

Many Canadians dream of owning a home. They might see it as a huge part of their financial security and personal satisfaction. However, unforeseen events can sometimes happen. In turn, it can be a burden for home buyers to keep up with their mortgage payments. As a helpful measure, the government offers mortgage relief options for distressed property owners. From the name itself, these programs offer support to those facing financial difficulties. 

In this article, Canadian Mortgage Professional will provide you with mortgage relief programs for securing a home loan in Canada. To our usual pool of readers, this is another one of our client-education pieces that you can share with any prospective client. This can greatly benefit them as we will also discuss the common types of mortgages. Want to know if you can skip a mortgage payment? What about pausing your mortgage? Keep reading for more. 

Mortgage relief programs for securing a home loan in Canada  

When you buy property, you must consider not only the amount borrowed, but also the interest rate. What appears to save you money in the present moment might end up costing you tens of thousands of dollars over the longer term. You must also consider your sources of income and other factors that will affect your mortgage. 

However, when things take a sharp turn, the government has mortgage relief options that can help you when you encounter problems with your home loan. Here are four of them: 

1. Employment Insurance (EI) 
2. Home equity line of credit (HELOC) 
3. Mortgage payment deferral programs 
4. Mortgage refinancing 

Let’s discuss these mortgage relief options in a bit more depth: 

1. Employment Insurance (EI) 

Are you an employee who has recently lost their job and has logged a minimum of 120 insurable hours during the past 52 weeks? You can apply for an EI as a mortgage relief. This can also be an option for those who left work temporarily due to maternity or parental leave, sickness, etc. 

Learn more about EI when you watch this video: 

If you want to better understand how EI works and if it is ideal for your financial situation (or if you are qualified), you can talk to a mortgage broker. You can browse our list of top mortgage professionals in Canada on our Best in Mortgage page. 

2. Home equity line of credit (HELOC) 

The next one is home equity line of credit (HELOC). This option is a revolving property loan where homeowners can use their property as security. You can access monetary funds based on the value of your home minus any mortgage you still owe.  

A HELOC works like a credit card, allowing you to borrow, repay, and borrow again up to a certain limit. The interest rates are usually variable, so they can change over time. You can use the money for various needs, such as home renovations or paying off other debts. 

With this mortgage relief, you can make interest-only payments during the borrowing period, which can help with cash flow. However, it's important to remember that if you can't repay the loan, you risk losing your home.  

Your mortgage lender will determine for your credit limit with these considerations: 

• the equity you have in your home 
• the type of HELOC you select 

To qualify for a HELOC, you only need to be approved once. After that, you can access this option whenever you want or need to.  

You should also prepare for a minimum down payment or equity of 20%. But if you want to use a stand-alone HELOC as a substitute for a mortgage, you need to pay for a minimum down payment or equity of 35%. 

Before they approve you for a HELOC, your home loan provider will have the following requirements: 

• an acceptable credit score 
• proof of sufficient and stable income 
• an acceptable level of debt compared to your income 

3. Mortgage payment deferral programs 

Homeowners experiencing financial hardship can apply for up to six months of mortgage-payment deferrals. They can get this from financial institutions that participate in these deferral programs by the government. 

Deferred payments are added to your mortgage. You should repay the amount when your mortgage is nearing (or earlier, if you can). This means that you’re likely to end up paying more over time than if you had not sought a deferral. 

4. Mortgage refinancing 

Mortgage refinancing at today’s lower interest rates may reduce your monthly payments, with or without extending your amortization period. 

If you have high-interest debt, refinancing can help you use the equity in your home to pay it off. This means you replace high-interest "bad" debt with lower-interest "good" debt, making it easier to manage your payments. This can also reduce the number of monthly bills you have, which can relieve financial stress. A mortgage professional can assist you in finding the best mortgage solution for your needs. 

Mortgage relief options during the pandemic 

When COVID-19 hit the globe, the Canadian government offered mortgage relief programs for affected property owners. For instance, they had the Canada Recovery Benefit (CRB). This was for those who weren’t eligible for EI. Its scope included self-employed freelancers and gig-economy workers. 

CRB was an option for homeowners who were unable to work or whose income had dropped by 50% due to the pandemic.  

Another mortgage relief offered was the Canada Recovery Sickness Benefit (CRSB). This program was also for employees who were unable to work due to pandemic-related reasons. 

Types of mortgages in Canada 

Before applying for mortgage relief, you need to have an ongoing home loan with a bank or other mortgage lender. If you apply for the most suitable home loan for your mortgage needs, you might not even require the assistance of mortgage relief options. you should first know the different types offered in Canada. These are: 

1. open mortgages 
2. closed mortgages 
3. portable mortgages 
4. assumable mortgages 

Let us discuss each of them below: 

1. Open mortgages 

With this option, borrowers pay off their mortgage in full or make extra payments without facing any penalties. This flexibility is beneficial for those who anticipate having extra funds available or may want to pay off their mortgage early. However, open mortgages often come with higher interest rates compared to closed mortgages. 

2. Closed mortgages 

Closed mortgages generally offer lower interest rates but come with restrictions on extra payments and early repayment. If you try to pay off the mortgage early or make additional payments beyond a certain limit, you may face penalties. This type of mortgage is suitable for those who prefer lower rates and plan to stick with their mortgage for the full term. 

Undecided about getting an open or closed mortgage? Watch this clip: 

3. Portable mortgages 

This allows borrowers to transfer their existing mortgage to a new property without having to break the mortgage and incur penalties. This is useful for individuals who want to move but wish to keep their current mortgage terms, especially if they secured a lower interest rate. However, the new property must meet the lender's requirements. 

4. Assumable mortgages 

Buyers can take over the seller’s existing mortgage, including its terms and interest rate, with assumable mortgages. This can be good if the current mortgage has a lower interest rate than the current market rate. However, the lender must approve the buyer's qualifications before the mortgage can be assumed. 

Learn more about assumable mortgages here: 

You can learn more about the types of mortgages in Canada that you can choose from in this article. 

Can you skip a mortgage payment?  

Yes, you can sometimes skip a mortgage payment, but it depends on your bank or mortgage lender's policies and your situation. There are mortgage providers that offer programs that allow you to defer a payment, especially during financial hardship. 

If you choose to skip a payment, the missed amount may be added to the end of your loan, and interest could continue to accrue, increasing your total cost. You should contact your mortgage lender to discuss your options and ensure you have formal approval, as skipping without permission can hurt your credit score. 

If skipping isn't an option, consider alternatives like loan modification or refinancing. Always communicate openly with your mortgage broker to better understand the implications set by your lender. Don’t have a mortgage broker yet? Find the right one for you on our special report on the 75 best mortgage brokers in Canada. 

Can I pause my mortgage? 

Yes, you may be able to pause your mortgage payments, often through programs like forbearance or payment deferral. These options typically allow you to temporarily stop or reduce your payments during financial hardship. 

To pause your mortgage, you should contact your lender to discuss your situation and explore available options. Keep in mind that the missed payments may need to be paid back later, which can affect your overall loan balance. Make sure to understand the terms and potential impacts on your credit before proceeding. 

Applying for mortgage relief programs in your homeownership journey 

As much as these mortgage relief programs can help you with your home loan, the choice to apply for them is still up to you. There are also other factors to consider such as your short-term and long-term plans. 

Overall, if you apply for these mortgage relief options and make the right decisions, you wouldn't need to give up the dream home that you already have. Instead of selling it, you can use these mortgage relief programs as leverage and protection for your property. 

Did you find this article on mortgage relief programs helpful? Let us know in the comments section below