Help: I Missed A Mortgage Payment. What Happens Now?
What Happens if I Miss a Mortgage Payment?
For any number of reasons, you may stop in your tracks one day and say to yourself, “Help, I missed a mortgage payment. What happens now?”
Although it’s a serious matter not to be taken lightly, be glad to know you do have options about what you can do next.
While you want to do your best not to be late on your mortgage payments, life happens and you might find yourself in a sticky situation.
You may also be juggling different debts each month and trying to decide which ones to pay.
It’s a tough predicament, but it’s best to address it head-on using these tips than to put it off for any longer and hope for the best.
You’ve Missed A Mortgage Payment. What Should You Do Next?
If you miss a mortgage payment, then your first step is to contact your bank or lender immediately.
A mortgage lender may be seeing more foreclosures than they thought initially.
They should focus on assisting you in finding a reasonable and affordable solution to your dilemma.
It’s common to be hesitant to contact your lender because you may feel embarrassed or that it’s too early to bring the matter to their attention.
You may be nervous that informing them of your situation might escalate the lender’s action to foreclose.
Remain calm and know that this scenario usually only plays out when all efforts and options have been fully explored and exhausted.
There are usually many different situations the lenders will look into, including:
- A longer amortization period to lower monthly payments;
- Switching from a variable rate to a fixed mortgage to provide a consistent payment plan you can budget for without fear of any future interest rate increase;
- Refinancing or second mortgage;
- There may be an option for a payment holiday or adding missed payments to the back of your current mortgage.
If it’s brought to their attention that the house is simply unaffordable, then the lender may view a short-term solution as unreasonable because it’s delaying the inevitable.
If this occurs, obtain more information and look out for yourself because the banks will be looking to protect themselves.
You’re going to have more options to save the house before you default on the house, so be prepared to take action because the situation can escalate quickly.
The next step you’re going to want to take is to be proactive about the next missed payment.
This means that if you anticipate missing another payment, you should place a call to your lender before you miss the next payment.
You’ll have more flexibility and more options by being proactive than if you wait until after you miss the payment.
You can call the mortgage holder or contact your servicing branch in this case.
The branch may not be able to offer solutions but can refer you to an alternative department within the bank.
How Long Does it Take for A Bank to Take Your House if You Keep Missing Mortgage Payments?
A lender will consider you, the borrower, to be in default whenever you fail to meet your mortgage commitment based on the original mortgage lending contract.
Your lender will then likely start taking actions as defined in the law to sell the property.
It’s common for homeowners to do nothing in response to the bank’s threats.
It can be very overwhelming to address the situation and face reality.
You may be able to get away with living in your home anywhere from two to six months after missing your mortgage payments.
It depends on how long it takes the lender to follow the process to obtain the right to sell the property.
Doing nothing and waiting around also means:
- You don’t get any say in the proceedings, they will move forward, and your consent is not required;
- Little or no notice is given if the house is sold;
- You may have to leave your home much earlier than you hoped.
The worst-case scenario for you will be a foreclosure or power of sale.
It all depends on what province you reside in.
Regardless, both options present the lender the right to sell the property so they can collect the outstanding balance of the mortgage.
How Home Foreclosure Works
A foreclosure and power of sale are both legal processes that are in place to allow the lender the opportunity to sell the property when the borrower defaults on the original agreement.
In Ontario, it is usually a process called ‘Power of Sale,’ and other provinces follow the ‘Foreclosure’ process.
Power of Sale
The ownership of the home changes hands only after the sale is complete during the power of sale process.
The original property owner, you, will receive any additional funds after the costs are covered, and the mortgage has been paid out.
While the sale will happen quickly, it isn’t going to be overnight.
As the homeowner, you have the right to review the transaction, and the lender must obtain a fair price of the property based on the circumstances of the sale.
You’ll be responsible for any shortfall if the lender isn’t paid in full.
Although the lender can issue a notice of sale any time after the mortgage is 15 days in default, they’ll likely hold off if you’re in discussions with them to find a workaround.
A redemption date will be stated in the notice of sale, and you’ll have this period to bring the mortgage back in good standing.
If you can’t meet the obligation, then the lender will retrieve the right to sell the property.
Another type of legal proceeding you might experience is called a foreclosure.
The lender applies to the court for an order to take possession of the property and sell it.
There are a number of rules the lender has to follow in this case.
For example, you’ll receive a date that will tell you when you need to have the mortgage paid in full.
While they can’t do much else as they wait, it’s a significant step toward them taking possession of the house.
Shortly thereafter, the lender will start the court proceedings.
A Petition to the courts will be filed that includes the amount you owe.
You can remain in the house during this time, but you will need to focus on how you can pay the mortgage back in full and get in good standing before they take your house.
You should review it for accuracy and confirm the information is correct.
It’s possible to try to delay the foreclosure by stepping in or accepting it and making it painless for all parties who are involved.
It’s a wise idea to obtain legal advice regarding if the Petition is accurate and what your options are, such as if you have a valid defense.
Pay Down Debt or Keep Your Home?
If you want to keep and stay in your home, then you must put making your mortgage payments a priority above all other unsecured debts.
You have many options when it comes to dealing with unsecured debt versus secured debt.
Speak with an expert and put a plan in place for dealing with your unsecured debt before you put it off and stop paying it.
While you want to make the mortgage affordable, you also want to know what you aren’t going to cause yourself additional problems and issues by ignoring unsecured debt.
When you find practical solutions for dealing with other debts such as credit cards and consolidation loans, your mortgage will become more affordable because you’ll have a positive cash flow each month.
You must be honest with yourself when you miss a mortgage payment about why it happened.
It may be that the house is unaffordable and that you’re overextending yourself.
In which case, you need to be proactive and get yourself out of your situation so you can find better financial security.
While it can be challenging to be realistic and remove your emotion, it’s necessary if you’re going to have a brighter future.
It’s a wise idea to sit down and create an accurate budget that shows monthly fixed costs and variable costs for your household.
Decide if you can find and come up with the funds to pay your mortgage this month or not.
You may discover that paying the mortgage is going to be a constant struggle each month and that you’ll need to rely on other forms of credit to subsidize other household costs.
If your findings tell you that your house is unaffordable, then you should plan to sell it if there’s equity in the house.
Otherwise, you should enlist professional advice if you’re in a negative equity situation and are unsure of how to proceed.
You don’t have to struggle through making these tough decisions by yourself.
If you could use some help budgeting your money and reaching your financial goals, reach out to us at Bankruptcy Canada, and we’ll be happy to assist.