To defer or not to defer? That is the greatest questions real estate investors are asking themselves during the COVID-19 pandemic. LendCity Mortgages briely spoke with Aditya Suma about the pros and cons of the mortgage deferrals, then Aditya produced this video...
The video is located at the bottom of the article.
Should you defer your Mortgage Payments on Rental Properties because of COVID-19?
A common question that many Real Estate Investors have right now is do I take advantage of this mortgage payment deferral.
If I do what are the pros and cons, you know and how much would it cost me to do so. So, I will be answering those questions in this video.
Namaskar a diverse a good morning. Good evening. What's up? Everyone?
I hope you guys staying home and safe.
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So with that let's jump into this topic what's mortgage deferral, you know, what's mortgage payment difference means basically, you know due to this COVID-19 many lenders.
So many banks are offering a six-month payment deferral what it Means is you don't have to pay the mortgage payment for the next 6 months if you opt for it again, as I said, it's something you can choose it. It's not like you have to take it. It's not like, you know, you don't have to so pretty much. It's up to you to make that decision whether to take it or not, but you know, I'm going to share my opinions again disclaimer.
I'm not an accountant or lawyer or mortgage agent to tell you. What's the right thing.
But I will share my opinion on what I am doing with my portfolio, you know, how I'm taking advantage of these different payments.
So basically I'm going for it. I'm taking doing deferrals on all my properties here is a reason. I have a couple of reasons why I'm going for it. First of all now with the current situation with the current tenant law that due to the COVID you cannot abide. If the tenant even if they don't pay the Reds, so right now not the would I'm getting paid most of my tenants all of my tenants are paying the rent.
But for some reason, if they don't pay, you know, one month later or two months later or three months later I can I don't have to be you know default and if I don't have money, so if you don't have enough savings, then it's a good idea to take advantage of this, you know.
A program so that you don't have to pay interest again. You don't have to pay the payments for the next 6 months.
So that's the first thing and the second thing is having an investor.
My mind always tells reminds me the coat that I was given by a great investor all-time great investor Warren Buffett, which is being fearful when everyone is greedy to be greedy when everyone is fearful so why I'm bringing them up that topic is right now. Now most of them are fearful to spend money.
So because of that there are huge discounts started to happen, you know in the stock market and also hopefully will happen in real estate has well you there are chances you will get discounted properties because now, you know, if this, not that would it won't happen that way but if it continues to happen the corona if we don't have an Explanation in Nick's one month or two months or you know the next few months if the lockdown continues to happen, then probably the chances are you know, people will run out of money people will need more, you know, we'll have to sell their properties in the worst-case scenario.
That's when you know when you will be able to find a motivated seller that's the case. That means you can find a discounted property. So has an investor If you have extra cash sitting in your bank, that's a really good thing, especially in the market conditions right now. You can either invest in real estate or invest in stocks. I'm, you know, trying to save every penny cancel all the expenses and trying to put everything in place so that I can invest in stocks, you know, some stocks and some real estate again. I will make another video on you know, what kind of investment I'm In this period but that's for another video for now.
Just the advantage is you know, now if you're not paying six months payments that means for example, like in my case, I have six properties. So a total of six properties mortgage payment will be somewhere around like 7,000.
So 7000 per month into six which is, you know, a pretty good amount which I can buy another property with that amount alone, or I can buy some stocks which are right now. Out of the stocks are for discounts. So again, that's an opportunity.
So you have an opportunity if you utilize it right again, I'm saying I'm stressing this point make sure you utilize it right don't buy unnecessary things because they are discounted, for example, if the cars are discounted now don't go by because they are not assets their liabilities. Just FYI.
So that's another big advantage and also just keep in mind that the tenants are if the tenants are paying rents right now. It doesn't mean that they're going to pay later on the right that's another concern that I have a lot. You know how my parents are paying but what if they don't pay like two months three months down the road and the chances are there for them not to pay because of the economy, you know, there is so much uncertainty going on right now, which means the chances for people to lose jobs or higher.
So why not take this Advantage just pile up the money. He even if you don't invest just pile up the money and that's where I'm getting to the cons here.
Now, you have taken the advantage then what's the negative side of it? So you save the money you're not paying it the negative side of it. Now, most of the lenders will have you have to pay interest on that interest.
How does it work?
Now, you're not paying principal and interest on the Mortgage payment right so that whatever the interest whatever the payment the total amount will be added to your you know, total principal amount that you have to pay. So that means when you're going for Renewal after two years or three years, that's when you will pay like your principal amount will increase because of the interest that you have to pay. Now.
This is added to that amount which means you're paying extra interest.
So basically you're paying interest Restore interest for that. You can check how much it will cost you to take that, you know different payments.
If you're an RBC client. I will leave the link below where you can just enter. How much is your mortgage payment and how much would it cost you it will tell you the exact amount. So that's a good idea to know how much it will cost you. So now you can make a decision based on the amount to see if you have an opportunity cost.
So Again, make that decision. You can look if you're not an RPC call your lender, you know, most of the lenders do have on their websites.
I'm most of my mortgages are with RBC. That's why I looked at RBC.
But if you are if you have a different lender go check out on the website. If you don't find it call your mortgage agent.
That's the best thing to do right now.
So that's the downside of it. It will cost you money. But again, III now actually one lender I heard so far is National Bank or waving off the interest for 6 months old which is good news.
If other lenders also do that. That's awesome. You have to take it.
And even if that doesn't happen still again, just think of both sides, right? What's the advantage of taking it? What is the disadvantage and how much would it cost you for not taking it, you know again to make your own decision.
I'm going for it.
That doesn't mean that you have to go for it, but I would recommend taking the Age of this Market condition to save the money and invest in the right way again make educated decisions because in this is the times where it's really hard to stay emotionally stable.
I know it's not just me like, you know many people are going through this because of this uncertainty and because of this, you know where you don't have fresh air. You have to lock down in your home.
So that means your brain is kind of so uncertain, but guys, I would strongly recommend don't make any emotional decisions at this point.
I know it's really hard to stay focused. But again, it's not impossible, right? You can just have a proper daily routine and all you can stay focused don't make financial decisions.
Especially Under Pressure makes it psychologically make it with a, you know, proper reasoning just make sure you write down what exactly what you're going through what how much, you know expenses you have to do on all those things. I know.
Many things that can go wrong, but just sometimes make your mind peace and then make the decision.
Hope this video is helpful for you. If it does, please hit that thumbs up button.
And also let me know in the comments below. If you have any questions, you know, especially regarding these development payments.
I'm happy to answer and also in this certain time of period if you have any other questions regarding investing or mortgages or you know, any other things let me know in the comments below. So I'll be making videos. I'm going to make more often more videos often in this period because I'm logged on at home. I'm doing very very very Less business right now. I'm just trying to focus give her as much as value for you guys because you know, I don't have anything to do with sorry.
It doesn't mean that like that. You know, that's that's a good way to stay focused, right? That's my way to say focus by providing value. That means now I feel good about myself. So with that, I'm signing off. Thank you so much. Don't forget to hit that Thumbs Up Button guys. Have a wonderful day.