Understanding Mortgage Payment Deferrals

If you’re going through a financial rough patch, you might be wondering whether you can pause your mortgage payments without hurting your credit. The answer? It’s possible — but there are important rules to know first.

Unexpected financial bumps — like a job loss, illness, or a surprise expense — can make those monthly mortgage payments feel overwhelming. When you’re in a tight spot, a mortgage payment deferral can offer a much-needed breather, giving you time to catch up financially without falling behind on your loan.
In this guide, we’ll break down what mortgage deferrals are, how they work, who qualifies, and what alternatives are available if deferring isn’t your best move. We’ll also walk you through lender-specific options like RBC’s “Skip-A-Payment” and CMHC’s hardship programs, so you’re equipped with real solutions.

What Is a Mortgage Payment Deferral?

A mortgage payment deferral is basically a pause button for your home loan. You and your lender agree to temporarily stop making regular payments — usually for a few months — because of financial hardship.
But here’s the important part: you’re not off the hook forever. The payments you skip aren’t forgiven — they’re added to your balance and must be paid back later, along with the interest that keeps piling up while you’re on pause.
Think of it like putting your mortgage on hold — helpful in a crunch, but not free money.

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What Happens When You Defer Your Mortgage?

• Interest still accrues — even though you’re not paying.
• Your overall mortgage balance increases, because that unpaid interest gets added on.
• You’ll likely face a longer amortization period (unless your lender bumps up future payments to compensate).
• Once the deferral period ends, your monthly payments may increase to help cover the shortfall.

So while deferrals are great for short-term relief, they come with long-term consequences that can quietly grow your debt.

Am I Eligible for a Deferral?

Each lender has its own rules, but generally, you need:

• A legit financial hardship, like a job loss, serious illness, or sudden drop in income.
• A mortgage in good standing — you must have been making your payments on time before applying.
• A mortgage product that allows for deferrals.

Some lenders may also look at your debt-to-income ratio and other personal financial details before approving a deferral.

What Deferral Options Do Lenders Offer?

Depending on your lender and situation, you might be able to:

• Pause payments for a set period (e.g., 1–4 months).
• Make interest-only payments, temporarily skipping the principal portion.
• Add missed payments to the end of your mortgage term (called capitalization).
• Set up a customized repayment plan once you’re back on your feet.

Lender-Specific Deferral Programs

RBC – Skip-A-Payment

• Skip one payment per year (monthly or up to 4 weekly payments).
• Must be in good standing.
• Skipped interest is added to your principal — you’ll pay more over time.

TD – Payment Vacation

• Defer up to 4 months if you’ve prepaid your mortgage.
• Option to reduce payments for a short time.
• Interest accrues during the pause.

BMO – Take A Break / Family Care Option

• Skip 1 payment per calendar year.
• Up to 4 skipped payments if caring for a newborn or sick relative.
• No prepayment penalty to catch up.

CIBC – Flexible Relief

• Offers both short- and long-term relief plans.
• May allow interest-only payments or full deferrals.
• Refinancing and amortization extension also possible.

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Pros and Cons of Mortgage Deferrals

Pros:

• Immediate financial relief.
• Avoids missing payments (which can hurt your credit score).
• Gives time to recover from temporary setbacks.

Cons:

• Interest continues to build.
• Mortgage balance grows, increasing future costs.
• Amortization may be extended, meaning you’re in debt longer.
• Monthly payments may go up after the deferral ends.

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Alternatives to Deferring Your Mortgage

Deferring isn’t your only option. If you’d rather avoid the long-term costs, consider:

• Refinancing: Tap into your home equity to pay off other debt or lower your monthly obligations.
• Extend your amortization: Lower monthly payments by spreading them over a longer period.
• Budget overhaul: Trim your expenses temporarily to stay current on your payments.
• Sell or downsize: In extreme cases, selling your home could free up equity and reset your finances.

Special Programs from Default Insurers

If your mortgage is backed by CMHC, Sagen, or Canada Guaranty, your lender is required to explore all relief options before defaulting your mortgage. This includes:

• Interest-only options
• Payment deferrals
• Term extensions
• Refinancing pathways

These government-backed insurers encourage lenders to work with you — not against you — during tough times.

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Frequently Asked Questions

Will deferring hurt my credit score?
No — not if your lender reports it as a formal deferral, not a missed payment. But your mortgage balance will still grow.
Do I still pay interest during a deferral?
Yes. Even if you pause payments, interest keeps accumulating.
Can I defer more than once?
It depends on your lender and whether your mortgage is insured. Some banks offer multiple relief periods over the life of the loan.
How do I apply?
Call your lender or check your online banking. Some allow you to request a deferral directly through their website.

Final Thoughts: Should You Defer or Not?

Mortgage deferrals can be a powerful tool when life throws a curveball. But they aren’t without trade-offs. It’s important to weigh the short-term relief against the long-term costs.
Before you commit, ask yourself:

• Is this a short-term setback or a long-term financial issue?
• Can I manage with a tighter budget instead of deferring?
• Have I explored all my options — including HELOCs, refinancing, or blended mortgage features?

If you’re unsure what path is right for you, don’t go it alone. Reach out to a Mortgage.Expert advisor for free, personalized guidance. We’ll help you make the smartest move — for today and tomorrow.