Short answer
FCAC expects federally regulated institutions not to charge interest on interest when a consumer receives qualifying mortgage relief under the exceptional-circumstances guideline.
The client concern
A payment is deferred, but the borrower does not understand whether unpaid interest is added to the balance and whether additional interest is then charged on that interest.
What the official guidance says
The guideline addresses the treatment of accumulated interest and expects federally regulated institutions to avoid charging interest on interest for consumers receiving qualifying relief.
What it does not guarantee
Ordinary mortgage interest can continue to accrue. The guideline does not make the deferred months free, erase principal or automatically apply to every lender. The contract and written relief agreement still control the calculation.
A practical Ontario example
Illustration only: A borrower pauses part of the payment for several months. The unpaid ordinary interest may still increase the balance, even if the lender does not compound additional interest on that unpaid interest under the applicable relief treatment.
What to do next
Request a written before-and-after amortization schedule. Ask what is capitalized, whether payments rise later and whether a lump sum is required. If the balance growth is unsustainable, explore a broader restructuring early.
Questions worth asking
- Does this federal protection apply to my type of lender and mortgage?
- Which relief, fee, penalty or payment terms are confirmed in writing?
- How will the decision change my balance, amortization and total interest?
- Will my credit, future renewal or ability to switch be affected?
- What is the lower-risk fallback if the lender declines the request?
Rajiv’s broker perspective
The first goal is to protect the client’s home, credit and decision-making time. I would begin with the existing lender because it may offer the lowest-cost correction. If that is not enough, we can compare an A refinance, alternative/B solution, MIC or private bridge based on equity, timing, total cost and a realistic exit. A regulator’s expectation should never be described as a guaranteed lender approval.
Need help preparing the lender conversation? Request a mortgage strategy second opinion with Rajiv.