A mortgage payment deferral lets you temporarily stop making mortgage payments when financial hardship makes it impossible to keep up. During COVID-19, hundreds of thousands of Canadians used deferral programs offered by every major bank. Those emergency programs are long over, but the option still exists — at your lender’s discretion — for borrowers facing genuine temporary hardship like job loss, disability, family emergencies, or business disruption.
The catch is that deferral is not free. Interest keeps accruing while you are not making payments, and that interest gets added to your mortgage balance. A 6-month deferral on a typical Canadian mortgage can cost $15,000–$20,000 over the remaining amortization. Understanding the true cost, the process, and the alternatives is essential before asking your lender for a pause.
How Mortgage Deferrals Work
The Mechanics
| Element | Details |
|---|---|
| Duration | Typically 1–6 months (lender discretion) |
| Payments during deferral | None (full deferral) or reduced (partial deferral) |
| Interest accrual | Continues on the full outstanding balance |
| Capitalization | Unpaid interest is added to the principal balance |
| Post-deferral options | Higher payments, extended amortization, or lump sum |
| Approval | Case-by-case at lender’s discretion |
What Happens to Your Balance
| Month | Starting Balance | Interest Accrued | Ending Balance |
|---|---|---|---|
| Month 1 | $450,000 | $1,875 | $451,875 |
| Month 2 | $451,875 | $1,883 | $453,758 |
| Month 3 | $453,758 | $1,890 | $455,648 |
| Month 4 | $455,648 | $1,898 | $457,546 |
| Month 5 | $457,546 | $1,906 | $459,453 |
| Month 6 | $459,453 | $1,914 | $461,367 |
Based on $450,000 balance at 5.00% annual rate.
After a 6-month deferral, the mortgage balance has grown by $11,367. This new, higher balance will accrue interest for the remaining 20+ years of the amortization — adding a total long-term cost of approximately $17,000–$22,000.
The True Cost Over the Full Amortization
| Deferral Length | Added to Balance | Total Extra Cost (20 yrs remaining) | Extra Months Added |
|---|---|---|---|
| 1 month | $1,875 | $2,800–$3,500 | ~1 month |
| 3 months | $5,640 | $8,500–$10,500 | ~3 months |
| 6 months | $11,367 | $17,000–$22,000 | ~6 months |
Based on $450,000 balance at 5.00%, 20 years remaining amortization.
The “multiplier effect” is real: every dollar of deferred interest earns interest of its own for the remaining amortization. This is why deferral should be a last resort, not a convenience.
How to Request a Deferral
Step-by-Step Process
| Step | Action |
|---|---|
| 1 | Call your lender’s mortgage department (not general customer service) |
| 2 | Explain your financial hardship clearly and honestly |
| 3 | Ask specifically for a mortgage payment deferral |
| 4 | Provide documentation (layoff letter, medical certificate, etc.) |
| 5 | Negotiate the terms: duration, post-deferral payment structure |
| 6 | Get the agreement in writing before stopping payments |
| 7 | Confirm how the deferral will be reported to credit bureaus |
What Lenders Want to See
| Factor | What Helps Your Case |
|---|---|
| Temporary nature | “I lost my job but am actively interviewing” is better than vague hardship |
| Good payment history | Never missed a payment = stronger case |
| Communication timing | Contacting before you miss a payment is much better than after |
| Documentation | Layoff letter, EI application, medical certificate, insurance claim |
| Plan to resume | Show you have a realistic plan to restart payments |
What Lenders Will Ask
| Question | Why They Ask |
|---|---|
| What caused the hardship? | Assess if it’s temporary or permanent |
| How long do you expect it to last? | Determine appropriate deferral length |
| What income do you have? | May offer partial deferral instead |
| Can you pay interest only? | Cheaper alternative to full deferral |
| Do you have other assets or savings? | Assess if deferral is truly necessary |
| What is your plan to resume payments? | Need confidence you can restart |
Post-Deferral: What Happens When Payments Resume
Option 1: Increased Payments (Most Common)
Your lender recalculates your payment to amortize the new, higher balance over the remaining term.
| Factor | Before Deferral | After 6-Month Deferral |
|---|---|---|
| Balance | $450,000 | $461,367 |
| Remaining amortization | 20 years | 20 years |
| Monthly payment | $2,960 | $3,035 |
| Increase | — | $75/month |
Option 2: Extended Amortization
Your payment stays the same, but the amortization extends by roughly the deferral period.
| Factor | Before Deferral | After 6-Month Deferral |
|---|---|---|
| Balance | $450,000 | $461,367 |
| Monthly payment | $2,960 | $2,960 |
| Original amortization end | 2046 | 2046.5 (~6 months later) |
| Extra interest paid | — | $17,000–$22,000 |
Option 3: Lump Sum Catch-Up (Rare)
Some lenders may ask you to make a lump sum payment to cover the deferred interest. This is the cheapest option long-term but requires having the cash available.
| Payment | Amount |
|---|---|
| 6 months of deferred interest | ~$11,367 |
| Effect on amortization | None — returns to original schedule |
| Total extra cost | ~$11,367 (no compounding) |
Impact on Your Credit
With a Formal Deferral Agreement
| Credit Bureau Treatment | Status |
|---|---|
| Reported as missed payments | No (if agreement is in place) |
| Account marked in special comment | May show “deferred” or “special arrangement” |
| Score impact | Minimal to none |
| Future lending impact | May be asked about it on new applications |
Without an Agreement (Just Stopping Payments)
| Credit Bureau Treatment | Status |
|---|---|
| 30 days late | Score drops 80–110 points |
| 60 days late | Score drops 100–130 points |
| 90 days late | Score drops 120–150 points |
| Power of sale initiated | Severe impact; stays on report 6–7 years |
Never stop making payments without a formal agreement. The credit damage from even one missed payment takes years to recover from and will increase your borrowing costs on everything.
Alternatives to Deferral
Before requesting a deferral, consider these less costly options:
| Alternative | How It Helps | Cost |
|---|---|---|
| Reduce payment frequency | Switch from accelerated bi-weekly to monthly | Extends amortization slightly |
| Skip-a-payment privilege | Some mortgages allow skipping 1–2 payments per year | Often built into the mortgage at no cost |
| Interest-only payments | Pay only interest, no principal | Cheaper than full deferral; prevents balance growth |
| Lump sum from savings | Use emergency fund to cover a month or two | Depletes savings but avoids deferral costs |
| EI mortgage protection | Employment Insurance covers basic expenses while between jobs | Must apply through Service Canada |
| Mortgage disability insurance | If you have coverage, file a claim | Coverage terms vary |
| Borrow from HELOC | Use HELOC to make mortgage payments temporarily | HELOC rate (prime + 0.50%) vs missed payment damage |
| Rent out a room | Generate income to cover partial payments | Immediate income boost |
Skip-a-Payment Privilege
Some lenders build in a skip-a-payment feature as a standard mortgage privilege:
| Lender | Skip-a-Payment Available | Conditions |
|---|---|---|
| TD | Yes | Must have made all payments on time; once per year |
| Scotiabank | Yes | Available after 1 year of payments |
| BMO | Yes | Once per year, no questions asked |
| RBC | Case-by-case | Not a standard feature |
| CIBC | Yes | Once per year |
Check your mortgage agreement — you may already have this option without needing to request a formal deferral.
Deferral and Mortgage Renewals
If you took a deferral, be aware of how it affects your next renewal:
| Factor | Impact |
|---|---|
| Higher balance at renewal | You will owe more, affecting the renewal amount |
| Lender’s risk assessment | The deferral may flag your file for additional scrutiny |
| Switching lenders | New lender may ask about the deferral and view it as a risk factor |
| Rate negotiation | Deferral history may weaken your negotiating position |
If you are approaching renewal and took a deferral, it is worth explaining the circumstances proactively — especially if switching lenders. A deferral during a documented temporary hardship (job loss, medical event) is viewed more favourably than one without clear cause.
Deferral During COVID-19: What We Learned
At the peak of COVID-19 (March–September 2020), approximately 780,000 Canadian mortgages — about 16% of all mortgages — were in deferral programs. Key lessons:
| Observation | Implication |
|---|---|
| Banks were willing to defer en masse | In systemic crises, deferrals are available to nearly everyone |
| Most borrowers resumed payments on time | The 6-month deferral was sufficient for most temporary hardships |
| Defaults did not spike post-deferral | Deferrals successfully bridged the income gap for most borrowers |
| Total cost was borne by borrowers | Higher balances and more interest over the remaining amortization |
| No credit damage for participating borrowers | Industry-wide agreement to not report deferrals negatively |
The COVID-19 experience demonstrated that deferrals work well for temporary income disruptions. They do not solve fundamental affordability problems.
When Deferral Is the Right Choice
| Situation | Deferral Makes Sense If… |
|---|---|
| Job loss | You have strong prospects for re-employment within the deferral period |
| Medical event | You expect to return to work after recovery |
| Business disruption | You have a viable plan to restore income |
| Divorce/separation | You need time to restructure finances |
| Natural disaster | Insurance claim is pending and will cover costs |
When Deferral Is NOT the Right Choice
| Situation | Better Alternative |
|---|---|
| Chronic affordability problem | Sell and downsize, or refinance to extend amortization |
| Permanent disability | File mortgage insurance claim; consider selling |
| Property is deeply underwater | Consult a licensed insolvency trustee |
| You just want extra cash | It costs $15,000–$22,000 for 6 months of “breathing room” |