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TailsYouLoseVille
If you're thinking of taking a COVID-19-related mortgage deferral. some experts are suggesting that you only do it if you really have to.
Aaron Saltzman of the MoCo has the story:
...(Mortgage) "Deferrals actually meant that interest accrued from each deferred payment was being added back into the principal balance of the mortgage," said the source (from RBC).
"Technically clients would then be [charged] interest on top of interest for those payments [that were] deferred," they said.
In effect, it's as though the bank is loaning you the amount that you would have paid in interest during the deferral period and then charging you interest on that loan as well.
"They're going to make more money because they've just loaned you more," said Peter Gorham, an actuary with JDM Actuarial Expert Services...
Oh, and just in case you were wondering, the story is pretty much the same for credit card deferrals.
The key to understand here, according the very fine finance folks involved at least, is that a 'deferral' is not 'relief'.
Sheesh.
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Tip O' The Toque to Greg Fingas and his excellent, detailed and regular links round-up feature over at 'Accidental Deliberations'...
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Saturday, March 28, 2020
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5 comments:
Bank of Canada rate 0.25%
Credit card rate about 25.00% ?
so 100x about ?
ICBC is also letting you defer monthly payments for three months. Beware...if you can't make your payments now, you'll probably be even less able to pay in three months. Whenever I hear about deferral programs, I fear many people will be putting themselves in great financial stress while thinking they are getting a break.
Very much in agreement, not sure of what else will be announced and from whom but also be careful on any future announcements from governments of credit cards, lines of credits and other financial obligations. And really be careful from help from the private sector E.G. the very nice car loan and banking folks.
Conversely if it make sense and can be physically done as hardly anyone is at work, as the fed. has cut the interest rate, refinancing at lower interest rates.
One from Bruce Hornsby about why many folks get to the point where they are one paycheck away from disaster, and 2 from oblivion. Something to think about as this or similar can and will happen again. Just a question of when and are you in good shape to withstand it, as the next governments may not be so willing to help, if ya get me drift.
https://www.youtube.com/watch?v=S1waQlrq2Ak
And that precisely why they are often referred to as "banksters". Just that they haven't resorted to bringing out the baseball bats!! Yet!!!
One only has to go back to the 2008 financial crisis to understand and see that banks got more bailouts than you and I could ever receive such concern and consideration by any politician.
Important point Anon-At-The-Top - thanks.
A wise course may be for folks to get a decent consolidation loan and clear as much of that usuriously acquired debt as possible.
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Anon#2--
The kids I work with tell me that the Modo folks run the best car co-op...I wonder if it would be better for some folks to go that route in the interim?
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Excellent advice Keith.
Thanks very much for the excellent tune!
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Always good to hear from you Lulymay--
Are you and yours doing OK?
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