Battling Financial Trouble: A Comprehensive Guide to Protecting Your Home
In the face of financial difficulties, losing your home might seem like an impending disaster. This article aims to shed light on the strategies and options available to you in such circumstances. Remember, as long as you’re proactive, informed, and willing to seek help, there’s always a way to mitigate the worst effects of a financial crisis.
Understanding the Risk
When you’re financially strained and unable to keep up with your mortgage payments, the risk of losing your home becomes very real. But, don’t panic. Understanding your situation and options is the first step towards finding a solution.
Communicating with Your Bank
Your bank can be a valuable resource when you’re facing financial trouble. Open communication channels with them and discuss your circumstances in detail. They can guide you about various options to manage your mortgage. For instance, you can possibly defer payments or negotiate a plan to catch up on the due amount.
Understanding Your Mortgage
To devise a strategy to protect your home, it’s crucial to understand the type of mortgage you have.
Bank Foreclosure
If your property is under a conventional mortgage and you default on the payments, the bank can initiate a foreclosure process. It means they can take back your home and sell it to recover the loan amount. In such a case, you won’t be liable for any shortfall if the selling price is less than the mortgage amount.
Please note: Even if the bank can’t sue you for the shortfall under a conventional mortgage, the foreclosure would appear as a delinquency on your credit report.
High-Ratio Mortgages
If your mortgage is a high-ratio one, the scenario changes. High-ratio mortgages are those where the down payment was less than 20% of the home’s purchase price, requiring mortgage insurance, such as CMHC or Genworth. In this case, if your home gets foreclosed and sold for less than the mortgage amount, the insurance company can claim the shortfall from you.
Secured Line of Credit
If your loan is a secured line of credit, you are responsible for any shortfall in case of foreclosure. The insurance protection that applies to conventional mortgages does not extend to lines of credit.
Bankruptcy and Proposals
If your financial situation is dire, it might be worthwhile to consider bankruptcy or a proposal to your creditors. Such options can help free up your income, which can then be directed towards saving your home.
Equity in Your Residence
In some jurisdictions like Alberta, if you file for bankruptcy, you’re entitled to keep a certain amount ($40,000) of equity in your residence. This law can provide a cushion against the loss of your home.
Considering Other Creditors
If you have other debts, managing them in a way that frees up income to save your home is crucial. Evaluate all your debts and consider options like debt consolidation, refinancing, or negotiation with creditors to lower your monthly payments.
Getting Professional Help
In situations of financial trouble, professional advice can be invaluable. Consider reaching out to financial counsellors or trustees in your area who can help navigate your specific circumstances.
In conclusion, if you’re worried about losing your home due to financial troubles, remember that you’re not alone, and there are resources available to help you. Knowledge is power, so arm yourself with the right information and make informed decisions to protect your home and financial future.
