Over the past few weeks, Canadian banks have provided individuals with mortgages, personal loans, etc. He allows him to postpone his terms. While these supportive measures may not have a direct impact on your credit score, they are still not without consequences. Please read the lines below before taking this opportunity to delay your refunds.
Tightening Insured Loan Conditions and Delaying Loan Maturities: Consequences
Recently, CMHC has tightened conditions for access to insured mortgage loans. Banks have also taken measures to reduce financial pressure on Canadian households. That is, a mortgage loan, a personal loan, possibility to postpone monthly payments, etc.
While the initiative is commendable, it is not without consequences for borrowers who decide to use it. Of course, your credit score will only be marginally affected by such a delay. That is, the increase in mortgage balance due to these delays. However, there are effects that go well beyond the credit rating. For example, “a natural disaster affected or declared” will be added to your file. And this will affect your future loan applications.
*Postponement of maturity = more difficult access to credit
Even if your credit rating is intact, this mention will stain your file. Banks will take this into account in the event of:
- Refinancing Request
- New Mortgage
- From Mortgage Renewal
Which means that the lending institution will be stricter with you. This postponement can block a request for refinancing. Some banks even ask for a return to normal for at least 2 months before offering the possibility to their customers to refinance. In other words, you have to prove that your financial situation is stable again before you can do anything.
This is all the more true if your profession is one of the employment sectors considered risky. For example, a well-known banking institution in Quebec has already announced that it has started to restrict access to credit in employment sectors deemed to be at risk.
In short, it is said that some economic sectors are more vulnerable than others in the face of the pandemic.
This fragility leads to the need to evaluate the economic expectations of these people in the medium term.
Indeed, given the exceptional situation we find ourselves in, the income of the previous 2 years cannot be used as a reference for future income.
Professions subject to such strengthening of credit conditions:
The Bank provides a non-exhaustive list of these risk sectors. Not surprisingly, there are service-oriented professions such as transportation, entertainment, tourism, catering and hospitality. From now on, banks will be conducting a more detailed analysis of the income and liquidity sources of these prospective borrowers. While we continue to take into account the consumer loan behavior before the crisis we are experiencing.