As many Canadians are facing tough questions surrounding their financial stability amid the COVID-19 crisis, Global News reached out to experts for advice. They say there are things you can to do ease the financial burden.
The Canadian Government announced a mortgage deferral program in March to help those who cannot make their monthly payments. The big six banks in the country: Bank of Montreal, CIBC, National Bank of Canada, RBC Royal Bank, Scotiabank and TD Bank also say they will allow mortgages to be deferred for up to six months.
“All banks are different, but typically they will take the interest payment and spread it out over future payments or perhaps even the life of the mortgage,” said Rob Tétrault with Canaccord Genuity Wealth Management. “They might actually tack on some payments at the back-end as well, but you are avoiding the principal payment for now, and you’re deferring the interest payment until a future time.”
Before deferring any payments, financial experts say to check with your lender about their deferment options to make sure they are available. Generally, defaulting on payments would hurt your credit score, however, if you were given the green light you should be okay.
“If a lender has given you permission to make payments, without penalizing you, then they should not be reporting that to your credit bureau, so you want to make sure you’re checking your credit regularly,” said Kelley Keehn, FP Canada Consumer Advocate.
Keehn noted that if you are making arrangements through a bank, it could take up to 30 days for the reporting to come in.
An option to help reduce financial stress right now, if you have too many bills and not enough cash flow, may be to defer some payments. Deferring certain types of bills first could help you get on your feet in the long run.
With mortgage deferral plans in place by the big six banks in Canada and an agreement made by the federal government, this would be the best first option to take.
“If you’re going to defer something, you defer the things that are the biggest first. Which would be those mortgages,” said Sandra Fry from the Credit Counselling Society in Winnipeg, Man.
“Typically your easiest payment to defer, will be the ones with the most asset that are backed, so your mortgages for example probably the easiest to defer, then your car payments and anything that is backed by an asset,” said Tétrault.
It’s also a good idea to look at which one of your bills carry the most interest. If you’re unable to pay off your whole statement, you could at least look to pay off a portion of it.
“Credit cards, you’re looking at 20 per cent, so at least if you can maintain the interest payment on those, you’re less likely to have a mess to deal with down the road,” Fry said.
When making the decision to defer a payment, Assistant Professor at the University of Manitoba, Chi Liao says there is one thing you should remember.
“Deferrals are not forgiveness.”
“So you will have to make the payment eventually, and over the period of your deferral your interest will continue to accrue,” Liao said.
The stock market has seen some significant shifts in 2020, with major drops recorded in both the U.S. and Canada. On March 12, both the Toronto Stock Exchange and the New York Stock Exchange implemented a Level 1 market-wide circuit breaker that put equity trading on pause for 15 minutes.
Some people’s investments have taken a beating, and they’re worried about their current portfolio.
Liao says it’s best not to look at it every day.
“Please don’t panic, don’t look at your portfolio for fun, you’ll probably end up making an emotional investing mistake which wouldn’t be ideal right now because markets are going to go up eventually and you don’t want to miss that recovery.”
Wondering if now is the time to invest in the market, to monopolize on the unprecedented lows? Maybe.
“If you’re in a position where your job is safe and you’re not worried about long term impacts to your cash flow and you do have cash that has been put aside to invest, I would figure out what number that is, what number you are willing to put in the market,” said Tétrault. “I would strongly advise to talk to your advisor and to consider a strategy to put a portion of that into work now.”
Tétrault also notes that you should spread out the rest of your capital, investing it in the market as it continues to correct itself or as time goes on so you can benefit from the current generational opportunity in the stock market.
Questions about COVID-19? Here are some things you need to know:
Health officials caution against all international travel. Returning travellers are legally obligated to self-isolate for 14 days, beginning March 26, in case they develop symptoms and to prevent spreading the virus to others. Some provinces and territories have also implemented additional recommendations or enforcement measures to ensure those returning to the area self-isolate.
Symptoms can include fever, cough and difficulty breathing — very similar to a cold or flu. Some people can develop a more severe illness. People most at risk of this include older adults and people with severe chronic medical conditions like heart, lung or kidney disease. If you develop symptoms, contact public health authorities.
To prevent the virus from spreading, experts recommend frequent handwashing and coughing into your sleeve. They also recommend minimizing contact with others, staying home as much as possible and maintaining a distance of two metres from other people if you go out.
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