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Financial Relief Programs: How Do They Work?

The financial hardships rising from the COVID-19 pandemic have popularized mortgage and loan relief programs. On March 18, 2020, Canada’s large banks united in their approach to offer up-to six-month payment deferrals of mortgage, loan and other credit products to customers experiencing financial hardship in response to COVID-19. These targeted measures respond to immediate challenges being faced across the country and will help stabilize the Canadian economy.

How they work:

A payment deferral plan involves halting or reducing payments for a short period of time, but interest is still accrued, and those payments are made up, typically at the end of the loan/mortgage term. In the case of a mortgage, a deferral means that interest accrued from each deferred payment is added back into the principal balance of the mortgage. Your balance won’t stay the same, it will increase due to interest accrued. Canadians should understand that a deferral is not mortgage forgiveness, the payment is being delayed for a defined period of time, but it’s not eliminated.

Regardless of your financial institution, you must apply for relief and the length of the application process varies by institution. The type of relief you can receive also depends on whether you qualify—the banks aren’t guaranteeing six months of skipped payments, they are offering up to six months of deferment depending on your individual circumstances.

A payment deferral program is intended to free up cash flow in the short term when you have no other way to pay and are at risk of defaulting on a loan or mortgage.

How Valley First can help:

Valley First has a well-established program called Back on Track, which is geared to helping provide financial relief (in the form of payment reduction or deferment) for members who find themselves unable to meet the terms of their loans or mortgages. It is administered on a case-by-case basis by our Special Accounts team. We reevaluate all applications after three months to determine if individual member circumstances have changed.

This may be an option if you:

  • Are a member who is at immediate risk of defaulting on your mortgage or loan due to a recent job loss or other COVID-19 related hardship
  • Have no demand funds available to you either in a savings account or within LOC limits

Who isn’t eligible for Back on Track?

  • Business and Commercial members—we offer a similar program for business and commercial members, talk to your advisor to learn more
  • If assistance isn’t immediately required, it is best to wait until it is—Back on Track is a last resort 

Not sure if that's the right option for you? Talk to an advisor to learn more. We’re here to help.

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