Navigating Bills Post-CERB and Payment Deferrals: A Comprehensive Guide
When the pandemic hit, the government implemented the CERB and several other relief measures, including the option to defer rent and mortgage payments. However, as these deferral periods end, you may find yourself facing a pile of hefty bills. Here is a detailed guide on what to expect and how to manage your financial obligations effectively.
Understanding Deferred Rent Payments
If you’ve opted to defer your rent payments during the pandemic, you likely entered an agreement with your landlord detailing the specifics of this deferral.
The Deferral Agreement
The agreement you signed probably stipulates that once the deferral period ends, you will have to resume paying your regular rent, plus a portion of the deferred rent each month. This arrangement continues until you’ve fully paid the deferred amount. In certain regions, the government has outlined guidelines for repaying missed rent. It’s crucial that you have a clear understanding of your individual agreement.
Troubleshooting Repayment Issues
If you foresee difficulties in repaying the deferred rent, it’s advisable to discuss it with your landlord promptly so you both can formulate a feasible solution.
Decoding Deferred Mortgage Payments
Deferred mortgage payments operate differently. A mortgage payment deferral only postpones the principal, not the interest. This can have varying outcomes, depending on your payment strategy during the deferral period.
Partial Payments Scenario
If you have been making partial payments to cover the interest on the mortgage, you’ll continue making the same payments as before. Your balance will not have reduced during the deferral period, but it did provide some financial relief.
No Payments Scenario
If you haven’t made any payments during the deferral period, the accrued interest can complicate matters. Once the deferral period ends, this accumulated interest is added to your remaining mortgage balance, meaning you’ll pay interest on your deferred interest for the duration of your mortgage amortization. This might increase your payments during the current term of your mortgage due to the increased principal amount.
To avoid this additional cost, inquire about the total deferred interest amount with your lender. If possible, pay as much of that amount immediately when your deferral ends. Remember to inform your lender if you plan to do this, as they will need to ensure the lump sum payment is applied towards the accrued interest and not just against the principal.
The aftermath of the CERB and payment deferrals may seem daunting, but with a clear understanding and strategic approach, it’s possible to navigate your financial obligations effectively. The key is to start planning now and communicate with your landlord or lender as early as possible to avoid any surprises.
