Last Updated on: July 2020

I Can’t Pay My Mortgage! What Can I Do?

Everyone was already feeling the economic crunch when Covid-19 came along. Many workers have already lost their jobs. In March 2020 there were more than 400,000 jobs lost in Ontario alone.lost in Ontario alone.

 

Canadians are finding it hard to pay their mortgages. In the last three months of 2019, there was a one percent increase in the number of households that are more than three months behind in their mortgage payments. This number is expected to double in the first half of 2020.

 

Like so many others, you may find yourself in a similar situation. You may be overwhelmed by debt and be unable to pay your mortgage. If you arm yourself with information and some useful advice, you may be able to avoid foreclosure.

Talk to your loan provider

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Talk to your loan provider

You might be afraid to call your bank. You’re worried that you might bring attention to the problem. Don’t worry, they already know.

The longer you wait to contact the load provider, the more difficult things are going to become. They may be able to provide you with options, but you need to reach out early,

 

Just by contacting your loan provider, you demonstrate that you are concerned about the situation. They will be more willing to work with you because you are making an effort.

Repayment PLan

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Repayment Plan

If your inability to pay is temporary, then you may want to consider a mortgage repayment plan. This may be the perfect solution if you are between jobs, or your financial woes are short-term.

With a repayment plan, the lender takes your overdue amount and spreads it out over the coming months. This sorts out your delinquency and paves the way for you to get caught up.

Be careful not to jump into a repayment plan too quickly. First, you have to know that your situation is going to get better. This can’t be a guess. You must know that things are going to change. Failure to meet demands for repayment can trigger a demand letter.

Your outstanding mortgage payments are being added to future monthly payments. You need to know that you can handle the monthly hike. There’s no sense entering into a repayment plan if it only delays your problem.

Seeking a forbearance

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Seeking a forbearance

A forbearance means that your lender has agreed to delay your payments for a period of time. It also means that the lender delays their right to take legal action against you.

 

To offer you a forbearance, your lender will have agreed to recover your outstanding amount in a lump sum. This sounds great, but there are some things to know.

 

Your mortgage is still going to accrue interest during the forbearance period. This means that the cost of your mortgage is going to increase. The forbearance becomes a part of your credit history and will make it difficult for you to get a loan in the future

 

Banks are very reluctant to offer a forbearance. After all, they have to be certain that you will be able to make payments in the future. Most mortgage holders will not qualify for a forbearance.

Mortgage Modification

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Mortgage Modification

A mortgage modification means that you and your lender consider new terms for your mortgage. This option is usually only available for long-term hardship.

The kinds of terms that might be modified include lowering the interest rate or extending the loan period. A bank may be willing to modify the terms if they think it will help them recover the mortgage amount overall.

Treat a mortgage modification as if it were a new loan. Give it the same careful thought as you did the original mortgage.

Refinancing

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A forbearance means that your lender has agreed to delay your payments for a period of time. It also means that the lender delays their right to take legal action against you.

 

To offer you a forbearance, your lender will have agreed to recover your outstanding amount in a lump sum. This sounds great, but there are some things to know.

 

Your mortgage is still going to accrue interest during the forbearance period. This means that the cost of your mortgage is going to increase. The forbearance becomes a part of your credit history and will make it difficult for you to get a loan in the future

 

Banks are very reluctant to offer a forbearance. After all, they have to be certain that you will be able to make payments in the future. Most mortgage holders will not qualify for a forbearance.

Understanding Canadian foreclosure rules

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Okay, there’s nothing you can do with lender options.

 

Keep in mind that lenders don’t want to foreclose. It costs them money. They will only initiate it if you do find yourself at risk of a foreclosure, you need to understand Canadian foreclosure rules.

Foreclosure vs Power of Sale (POS)

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Power of Sale (POS)

A foreclosure costs a lot of time and money. The courts are involved right from the start. The process can take from three to twelve months.

Several Canadian provinces do not use foreclosures. Instead, the lender makes use of a Power of Sale. This allows the lender to take control of the property and sell it in only a few weeks. The court is only involved at the end of the process. A POS is faster and cheaper than a foreclosure.

Foreclosure Process

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Foreclosure Process

A foreclosure will be initiated by your mortgage provider when Power of Sale is not available to them. The process is similar to a lawsuit.

Your lender will serve you with a Statement of Claim. Once served, you become a defendant. You have twenty days to respond to the claim. If you do not respond to the claim, the court will issue a default judgement in favour of the lender. At this point, you are out of the process and cannot defend the action.

Next, the court will likely issue a Redemption Order. This order gives you a period to come up with the money. A Redemption Order will give you about six months to clear your mortgage delinquency.

The court could decide to issue an Order for Foreclosure. This will be the order of the court if it is determined you have no ability to come up with the money. The full ownership of the property is turned over to the lender.

Power of Sale Process

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Power of Sale Process

A Power of Sale (POS) is distinctly different from a foreclosure. A POS will be a clause written into the mortgage agreement if it is allowed in your province.

With a Power of Sale, the lender is able to sell your house right away. The title to your home is not taken over by the mortgage provider. Your house must be sold for the highest possible price, even if is more than the outstanding mortgage amount. You will be paid any remaining amount from the proceeds of the sale.

A Power of Sale is a resolution available to lenders in the provinces of Ontario, New Brunswick, Newfoundland and PEI.

Can you stop a foreclosure?

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It is easier to stop a foreclosure than a Power of Sale. A foreclosure involves the courts right away, and the resolution is up to the court.

When a court believes that you have any possibility to pay, they will give you time to do it. As long as you try and do something during that period, you may be able to extend the process further. You remain in your home during the entire process.

A foreclosure is a court process. You are able to defend the action just like in any other lawsuit. A lawyer may be able to represent you to properly defend the action.

A Power of Sale (POS) is much more difficult to stop. They will notify you about fifteen days after your default. You will have a redemption period of about thirty days in which to settle the default. If you haven’t resolved the delinquency during the redemption period, the lender will immediately file the required paperwork to have you evicted. The only option you have at this point is to settle the entire mortgage before the sale.

Trying to delay a foreclosure or a Power of Sale is a bit like burying your head in the sand. You still need to be able to resolve the situation. It is not going to go away. All it may do is buy you a bit of time.

Foreclosure and your credit score

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Foreclosure and your credit score

The actions of your mortgage provider will determine the impact on your credit score. If they report the foreclosure, then it remains on your credit report from seven to ten years.

The lender might not report your mortgage default. A mortgage is a secured loan. Your credit report is used for unsecured loans such as a bankruptcy. If it is reported, it will make it very difficult for you to secure a future loan of any kind.

Given the economic crisis, most banks are now reporting foreclosures. The foreclosure is being treated as any other loan that is in arrears or default.

Avoiding Foreclosure

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Avoiding Foreclosure

Losing your home to a lender is a terrible life experience that you should try to avoid. There are a few things you may be able to do to prevent foreclosure.

You may be embarrassed by your financial situation. It is really a good idea to be open with your family. You should let them know that you cannot pay your mortgage.

Someone in your family may be willing to help you financially. At the very least, a family member may know a lot about mortgages. You should listen to their advice.

Try to deal with other debts

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Try to deal with other debts

Take a look at any of your other debts. Maybe you can defer payments and establish a payment plan with the lender. Settling other debts will free up some cash to make your mortgage payments.

Your mortgage is your most important debt. The bank will definitely commence legal action at some point. Typically they will wait about three months before they act.

Declaring Bankruptcy

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Declaring Bankruptcy

Your situation may be so overwhelming that you may want to consider bankruptcy.

Only unsecured loans can be included in a bankruptcy. A mortgage is a secured loan and cannot be included. Declaring bankruptcy will not take care of your mortgage problems, but it may make some cash available to pay your arrears.

Mortgage Assistance

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Mortgage Assistance

If you paid a deposit of less than twenty percent when you bought your home, the lender will have been protected through mortgage insurance. Mortgage insurance will most often have been provided by the Canadian Mortgage and Housing Corporation (CMHC).

The CMHC can assist you with your mortgage difficulty. You may qualify for one of their programs. The CMHC is empowered by parliament to provide assistance to first-time homeowners that may be struggling to pay their mortgage.

You should contact the CMHC and your lender as soon as you have problems paying your mortgage. The CMHC may be able to assist.

During the Coronavirus crisis, the Canadian government has put in place special measures to assist homeowners with mortgage payments. Consult the appropriate federal or provincial agencies for more information.

Selling a mortgaged home

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Selling a  mortgaged home

Before the bank takes your home, you may want to try and sell it.

When you sell a home, a buyer presents you with an offer to purchase. If you are happy with the offer, you accept it. Once the closing takes place, your house is turned over to the buyer.

Here’s what happens with your mortgage. If there is equity in your home, the buying price may be higher than your outstanding mortgage. In this case, your mortgage amount is paid to the bank. Should any outstanding mortgage amount remain, you are financially responsible for that amount.

Keep in mind that there are costs associated with selling a house. On closing, you will pay legal fees, real estate commissions, land transfer tax and other costs. You are already behind in your mortgage payments. Make sure that there is enough equity in your home in order to cover these additional costs. Also, make your lender aware that you are trying to sell the home. The lender may be willing to defer monthly payments until you sell.

This Is Green Title This Is Grey Title

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Renting your mortgaged home

It may not be a good time to sell your home. The real estate market may be in the dumps. Those nasty mortgage payments are still staring you in the face.

One of the options you may have is to rent out your home.

Keep in mind that there are costs involved in becoming a landlord. You may have to fix up your house, pay a lawyer to draft a rental agreement, and cover the cost of your having to move.

Don’t forget that you need to get enough rent to cover your monthly mortgage payments. If you are already in arrears, you have to be able to sort out that amount as well.

Now you’re a landlord. You are responsible for all repairs, recurring maintenance and taxes. All of these costs have to come out of the rental amount you receive.

One final thing. There is no guarantee that your tenants will be able to pay the rent on time, or at all. You will still have to make your monthly mortgage payments

Looking at the bigger picture

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Looking at the bigger picture

Losing your home to the bank is both scary and depressing. During the process, you will feel like your whole world is crashing down. Your mortgage payments are likely not your only financial difficulty. You feel trapped and alone.

 

Dealing with a foreclosure or Power of Sale is not the end of your world. Yes, it’s never nice to lose your home. You’ve worked so hard to have it.

 

The bank has forced you out, and your home is gone. You may now be able to settle some of your other debts. You might just recover from all of this and be able to own a home again in the future.

 

 

Don’t let the stress take hold of your life. There are lots of organizations and professionals that can help you through this temporary period. They’ll be able to help you sort out your emotions and get you back on the right emotional path.

 

When you can’t pay your mortgage, step back and look at the bigger picture. Find out what you can do to resolve things. Talk to your lender. Talk with your insurer. Check out federal and provincial agencies. Equip yourself with information and keep things together as long as you can.

 

 

I'm Foster M, and I am here to share the right information that will get you out of legal issues. Unlike many, I know what it feels like almost to lose everything. I have been there. Luckily, I got help and advice from the right people that helped me a lot in getting my life back on track. Today, I aim at ensuring that as much as possible, I should help others in getting their lives back! I hope this article helped someone. I will keep it coming :)

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