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Edmonton Business Consultant | Mortgage Deferral Canada Covid 19

So I’m meeting with it comes to it, you know, in your ears. What is it? Are you going to pay more interest? Yes. Could your credit rating be seven 40 instead of seven 50? Yes. What’s your credit rating going to be? If you run out of cash and can’t pay anything,

I can see you a whole lot with these two. Uh, I can be a, or I’m B cause it’s mad.

Hi. Thanks for tuning in for another episode of ask Sperl CPA. I am here with Trevor from inspired method. I ever went Trevor we’re back. We’ve got Trevor with his shirt today. Sure. We got a shirt. So, um, you shouldn’t see the issues. If you can only see the fashion full pause in the rest of the office though, that would be the thing. So today we are talking about murder mortgage deferral, uh, and specifically how it relates in Canada with the COVID-19 just a little bit of a, an update before we get into the, uh, mortgage deferrals are, you know, the, we’ve seen some payments go through the, the, uh, provincial system. Uh, it’s really bottleneck. It’s watching out, but you know, it looks like it’s coming along and there has been some updates to the federal, uh, EDI support system for Edmonton Business Consultant owners. They’ve changed the name yet again.

Uh, but again, the, the, you know, the stuff is pretty big at this point, but it looks like there’s something coming down the pipe, but it’s kind of a hurry up and wait on the federal program for April shocking. So Trevor, when it relates to the mortgage deferrals, one of the questions, what, and what are people asking? Yeah. Well, the first question would be what was announced on March 18th. So March 18th, the candidal large banks, they said, quote, unquote, I’m going to quote rate for this area of site says Canada’s large banks have confirmed that have confirmed that this support will include up to a six month payment deferral for mortgages. So that was posted directly on the CRA website, March 18th. Everyone was ready to go on that one. So we saw that. Um, so the next question, Josh were CRO calls communicated to frontline staff before the announcement 100%, no, uh, they were not communicated to the staff.

So I want you to like, you know, put it in perspective. Imagine if you worked at McDonald’s flipping burgers, making fries at McDonald’s and all of a sudden on your way into work, one day you start hearing McDonald’s now offering ribeye steak, medium rare whenever you want it. And then, you know, you put on your headset, you’re at the drive through and all of a sudden people started to pull it up and say, I want that a ribeye steak, medium rare for a dollar place. Um, and people were scrambling. That’s exactly what was happening. Um, would you like fries with that in the banks? They had no idea what to do. You know, the promise was out there. The cat was out of the bag, but no one had an idea how to handle it internally. They didn’t have their marching orders. Awesome. Um, next question.

What were some of the common early responses? So the common early responses, or, you know, no, we’re not doing it even though it had been announced or you don’t qualify. Uh, even though they didn’t know if he did qualify, they’re just saying you didn’t qualify. Um, and they were telling people, you know, we’ll, we’ll have to take some information and we’ll have something to get back to you. Um, they’re not getting back to you. They will not call you. Um, you know, or, you know, we’ll look into it, we’ll get back to you after April, you know, which is when people needed, it was the 1st of April. So there was a whole bunch of, you know, terrible responses that came out of that. So, um, now why is it impractical for banks to verify individual circumstances right now? So let’s think about how most people get a mortgage verified.

It usually runs on a five year running schedule, right? So every five years, you know, you’re going to renew your mortgage. You look at all the property owners out there, and once every five years people are going to go through it. And even if you’re renewing, if you’re renewing the due diligence is usually pretty low, right? Unless you’re extending the amortization period or, you know, getting some more equity out, but you know, the thought that they were going to drill into everybody’s individual circumstance and requalify them for their mortgage all at once. It’s just bizarre. There’s no practical way for the banks to really drill into this. And even if you’re looking, these circumstances are unique, you know, when we’re trying to project what people are going to earn next month in a hundred year pandemic, it’s, it’s, it’s an unthinkable. Yeah. Completely unprepared. Yeah.

Um, so who, how have the banks responses changed since March 18th? Now they’re starting to recruit girls, so you’re starting to get approvals. Um, you know, I had some pretty funny discussions with some bankers that I know they told me some things about what happened and, um, you know, some of the what’s come down from the, uh, from above on approving things. And it’s like, you know, uh, we can’t say, we can’t say the, the instructions directly on YouTube. We might get banned from YouTube, but it was basically get everyone approved. Um, so they’re starting to communicated down. People are getting their approvals, you know, you gotta be persistent on that. So, um, so is that no one first time, contact them again, call back, call back. You know, if they’re giving you an appointment three weeks in advance, don’t take, just call back. You get a no call back again tomorrow, you know, like, you’ll get your response.

It’s you just gotta be patient with it. And persistent, like, don’t be ridiculously patient because you could avoid, you know, having to make an same monthly payment come the first of the month here. Yeah. Now what would you tell anyone out there who has called once and got rejected? We kind of went over that. Yeah. So same thing. Just call back, you know, make sure, make sure you call back the answer that you got. The first eight, the answer you got at nine o’clock in the morning might be different from answer. You get at three o’clock in the afternoon, they’re rolling it out. They’re educating their team. So now we’ll differing your mortgage cost you more in interest in the long run. Yes. It will cost you more an interest. They’re they’re not, they’re not giving you an interest free period. They’re just taking the payment.

They’re accruing the interest and they’re deferring it to after. So they’re either going to increase your payment or tack it onto the end of the amortization period, but it’s, it’s going to cost you more in interest for sure. If you do this, um, now will this affect your credit rating? You will like, it’s wrong for me to say no, but in majority of the circumstances, it will be minor. I mean, maybe you had a 750 credit rating and maybe it’s going to be seven 49. You know, it could be different in different people’s scenarios, you know, someone could, they potentially drop drastically the potential is there, is it likely? No, not likely. Um, you know, and usually if this is going to dramatically impair your credit, you probably have a lot of other things going on at this point in your credit. Anyway, this isn’t, you know, this isn’t going to be the defining factor of your credit rating.

Okay. Uh, next question is, do you think the banks want people to take advantage of this program? Absolutely not. They do not want you to take advantage of this program. They promised it their early responses almost looked like they were trying to get out of it. You know, I’ve seen some PR pieces from a RBC through CDC where they’re trying to, you know, fearmonger people into this is going to affect your credit. You’re going to pay so much more in interest. Um, yes. And yes, they’re right on both accounts, but the degree of which they described it, you know, made me think that they are trying to persuade people against it. You know, I think a lot of people should definitely be considering it right now. What’s a bigger problem paying a little more in interest or running out of cash. So, I mean, when it comes to it, you know, in your areas, what is it?

Are you going to pay more interest? Yes. Could your credit rating be seven 40 instead of seven 50? Yes. What’s your credit rating going to be? If you run out of cash and can’t pay anything, doesn’t matter. It doesn’t matter. It’s going to be abysmal. Right. Um, so if, if you’re, you know, stuck in between, you know, what’s the right answer. It’s, you know, running out of cash is far worse than paying a little bit more interest right now. Uh, what timeline should people be considering when choosing, if they should defer? We’ve been talking about this for a while now, but this is a potentially a six to nine month event, right? When you start looking at the projections that we have in other jurisdictions, you know, we’re, we’re, we’re, we’re behind, you know, other, you know, China and Italy and things like that for, I didn’t know, maybe we get into serious, maybe we don’t, but we can kind of start to see the length of this, um, this pandemic, right.

And I’m telling people, you know, you have to plan on a six to nine month event, right? Um, you, you really should be taking a longterm horizon on this. You shouldn’t be thinking, can I make my mortgage payment next month? You should be thinking, what is my six to nine month task flow look like from here on out? Yeah. It’s just planning, planning ahead. Uh, so the next question is, do you think people should wait until they’re out of cash before deferring? No. No. I don’t think you should wait until you’re out of cash because then it might be too late. Maybe, maybe the deferral of one payment, you know, a month, three of this pandemic, maybe it won’t work then. Right. So, but if you could go back and tie it into first six payments, you might’ve gotten through this. Right. You know, we’re talking specifically to Edmonton Business Consultant owners when their incomes are, you know, highly variable, but this is a very unpredictable time.

And you’ll those last two or three months and deferrals might not save you. But if you could go back in time and deferral six, maybe that’s the way to do it. Uh, the next question is, is it easier to take advantage of mortgage deferral or obtain additional financing? Your mortgage deferral is going to be far easier. You know, they’ve come out. Of course the, these federal government responses we’ve been, you know, we’ve been talking about that. It makes it think that there’s there’s business loans flowing all over the place. They’re not flowing any new money yet. Don’t kid yourself like BDC. Isn’t beaten down your door to give you anything. That’s a G I mean, you’re lucky if you can get through on a phone call to get an arrange an agent before April 1st. Nevermind. If you could get a loan disperse before then. So it is far, far, far easier to defer any mortgages or existing term loans with the big banks than to get a new loan.

Yeah. I mean, they’d be only people who would be getting any money from them would be people who already owe them significant amounts of money. That’s how they, they want to do it. I mean, the banks are going to take a look at it. They look at, if they’re into someone for $500,000, they would rather lend them an additional hundred than someone new off the street, because they look at that as protecting their original investment in you. Right. So new money is hard to come by and it’s going to be until they figure out how much they have to lend to protest, protect their existing interests. Yeah. Um, now the next question here, how would you rank mortgage deferral to some other deferral options out there? I like it better. I mean, when you look at most small Edmonton Business Consultant, they only got two real leavers that they can pull.

Right. They can reduce their labor costs or they can reduce the cost of the space that they’re in. They usually far exceeds any of the other leaders that they can pull on what they’re paying on dues and subscriptions or interest in banks. Right? Like it’s, it’s just far different of a number, right. So, you know, when it comes to, we’ve heard things like they’re going to defer utilities, right? You can defer property taxes, but we have no idea or no, uh, no idea what those repayment provisions are that could be, you’re going to pay double payments at the end of the six months and six months from now. It’s not, you know, all the, the pandemic might’ve of, of, you know, the curved by a flat note, right. The economy isn’t going to be cooking at that point. Right. So the ability that you’re going to be able to make double payments and do you want to own every little, do you want to one build a Telus and one bill, the city of Edmonton, one builder Rogers, and one build a direct energy, and you’re trying to negotiate all these different items and figure out, you know, trying to, uh, you know, look through it when the effectiveness and deferring your mortgage payment would probably, you know, equate to the, all of those other ones, you know, a factor of 10.

Yeah. Right. Especially if you, if you are leasing a large property, say 610,000 square feet, a big deal. Now the next question I have here is, um, how do interest rates on Edmonton Business Consultant loans and personal mortgages compare? Yeah. So here’s the other thing let’s say you, you can get the business loan most of the time, you know, I honestly say like 90% plus of the time your interest rate on a residential mortgage is the lowest form of interest. You can find the interest that you’re paying on that business loan is almost always higher. So even if you could obtain the Edmonton Business Consultant loan, it’s going to be for a higher rate than you could have got on a mortgage, on a residential or even a mortgage on a commercial property. Okay. So, um, can deferring personal loans, help entrepreneurs reduce taxes. Yeah. If you’ve got a personal mortgage out there, this isn’t like a dollar for dollar reduction, let’s say you’re, you’re, uh, you know, let’s say your mortgage is only 1200 bucks a month.

Okay. So it’s $1,200 a month. Um, you know, if you’re in a 40% tax bracket, you know, taking that money out, you would have had to take, you know, $2,000 out a month out of your corporation paid $800 in tax and then paid that $1,200 mortgage. So we’re talking about before tax dollars. So, you know, with an effective tax plan, you know, you can likely save your cashflow, you know, more than what that mortgage is, because now you can avoid the personal tax on getting that money out of the corporation to pay the personal mortgage in the first place. So it’s a big lever to pull. Awesome. So the next question, the last question, should you consider rental income secure in your cashflow projections? No. Is going to be the wild West out there in terms of getting tenants, getting tenants to pay. Um, so if you’re running your cashflow projections and you’re looking at kind of worst case scenarios for your Edmonton Business Consultant, also look at worst case scenarios for your tenants and that your rental income could go to zero, you know, and can you make that mortgage payment if that rental, you know, if your worst case projections for your Edmonton Business Consultant come through and your rental income comes to zero, so you gotta think long and hard about yeah.

Okay. It is going to save you some money and interest. Uh, if you continue to make these payments, but are you absolutely sure. You’re not going to run out of cash. And I don’t mean you’re going to run out of cash next month. Are you going to run out of cash sometime by the end of the year? That’s the that’s, you know, the question that we’re dealing with here. So, uh, those are the considerations you don’t think long and hard about this. The know they put this tool out there for people to use. You know, it’s not right for everybody, but you should think long and hard about it because it’s right for a lot of people. So that’s what we have here. This time. We’ll have more coming up on rent reductions. Thanks very much.