Walking Away From A Mortgage in Canada
How To Walk Away From A Mortgage
It’s possible that you have negative equity in your home.
This basically means that the mortgage has a higher value than the market value or equity of the property.
It is often referred to as being underwater.
Ultimately, this means that when it’s time to sell, the home price will not cover the cost of the mortgage.
There are numerous reasons why this can occur.
For instance, you might find that there was a price decline.
This can be the case when there is a shock to the economy.
It’s possible that you bought at the point where the prices of houses were sky high and then they dropped.
This could leave you with a substantial level of debt when it is time to sell.
Alternatively, debt consolidation can also leave you in this situation because a second or third mortgage pushes the debt higher than the value of the home.
Or, you might have a negative investment cash flow.
Essentially, the property was purchased as an investment and the money you make is not covering the cost.
Do You Have To Sell?
Not always, you can wait for the market to rebound so that when you do put your property up for sale you can make the profit that you need.
If you can afford to keep the property on, you should be able to hold off on the sale.
Of course, it’s possible that you are in default.
In this case, then proceedings will occur to collect and if you are unable to respond, the lender or bank will begin the process of selling.
If you are left with a shortfall when you sell then the lender can pursue you to claim the money that they are owed.
How Should You Handle This Situation?
If you are left in a situation beyond a hypothetical shortfall where you are forced to sell, then you need to know how to deal with this.
There are a few ways to respond to this situation.
Creditors will typically pursue the legal actions available to them quickly.
They could seek out an order for wage garnishments and eventually seize any tax refunds too.
It is important to be aware that a mortgage is initially a secured loan.
However, this changes when you experience a mortgage shortfall.
The creditor and the loan itself is now unsecure.
You may have had a low downpayment and if this is the case, the mortgage could have been subject to insurance.
If that’s the case, then this could be your first step.
However, when you do this, you are simply switching your creditor to the insurance company.
The debt will still exist and you will still owe it.
There are two clear options available to you when you experience this situation.
First, you can think about making a settlement through a consumer proposal.
With a consumer proposal, you can make an offer to your creditors.
They will then accept or reject your offer to pay a lower level of debt back.
Or, you can file for bankruptcy and use your assets to pay off as much of the debt as possible without leaving you with nothing.
Both options provide strengths and weaknesses.
You will need to consider your choices carefully before making a final decision.
The main purpose of the steps will be to either tackle high rates of interest or reduce the debt enough that it becomes easier to pay off over a shorter period.
Be aware that you won’t be able to complete processes like this without support.
You need to make sure that you contact a professional debt relief organization.
They will provide the right support and ensure that you are able to handle your debt the right way based on your finances, the debt you owe, and your individual situation.
We hope this helps you understand what you need to know about walking away from a mortgage in Canada.
As you can see there are options available to you for dealing with this situation.
If you need more information please make sure that you contact us or fill out an evaluation form.
This process takes minutes and we will get back to you as quickly as possible.
We have helped more than 100,000 Canadians gain the relief they need and we’re confident we can help you too.