What To Do If Your Mortgage Is In Arrears

Dealing with Mortgage Arrears: A Comprehensive Guide

The ongoing pandemic and subsequent financial turmoil have left many Canadians grappling with their mortgage payments. While mortgage deferrals provided some respite, these relief periods have mostly ended. Homeowners often consider their mortgage as the last debt they’d want to default on, and they may resort to acquiring new credit just to meet their monthly mortgage obligations. However, this strategy leads to an increased debt burden, thereby exacerbating the original problem. So, what should you do if you can’t afford your mortgage payments? Fortunately, there are several strategies that can help you retain your home.

When Mortgage Payments Cease

Many homeowners who utilized deferral options during the pandemic have managed to keep up with their payments. However, the cost of this temporary break now translates into higher future mortgage payments. If your income has decreased or you’ve taken on additional loans, keeping up with these increased payments can be challenging.

Missing one payment is manageable, but multiple missed payments can jeopardize your homeownership. Most mortgage agreements stipulate that you’re in arrears if you’ve missed payments for three consecutive months or more. Mortgage lenders have various methods to deal with non-payment, such as power of sale or foreclosure.

Addressing Mortgage Arrears

If you’ve fallen behind on your payments but believe you can catch up, it’s advisable to discuss this with your mortgage lender. You might be able to negotiate for some leniency.

In case your lender refuses further deferrals, you have a few options:


  • Refinancing with another mortgage lender.
  • Selling your home to escape high mortgage payments.
  • Considering a consumer proposal to restructure your finances.

Refinancing Your Mortgage

Seeking refinancing with a new mortgage may be your first step. However, if you don’t meet the income eligibility guidelines or have a poor credit score, securing a new mortgage may be difficult. Even with home equity and good credit, without sufficient income, you might not be able to refinance.

Selling Your Home

If you own more home than you can afford, you might need to consider selling your home and downsizing or renting. You can sell your home if you’re behind on mortgage payments as long as your lender has not already instigated any power of sale or foreclosure process.

Consumer Proposal

If your mortgage payments are late because of other debt, like credit cards or a car loan, you may want to consult with a Licensed Insolvency Trustee. They can help you eliminate unsecured debt, giving you more room in your budget for your mortgage payments.

Role of a Licensed Insolvency Trustee

If you can afford your home but can’t repay your other debts, it might be time to consider debt relief options like a consumer proposal. A consumer proposal can help you eliminate other problematic debt, thereby improving your cash flow and enabling you to catch up on your mortgage payments.

Equity and Bankruptcy

Most Canadians have seen a significant increase in their home’s equity from price appreciation. You can use this appreciation to make a proposal to creditors to eliminate unsecured debt and stabilize your financial situation. However, if your home is worth less than your mortgage, you can walk away. If your home is sold for less than the mortgage balance, the lender can pursue you to collect the deficit. However, this deficit can be eliminated through a consumer proposal, along with other debts.

Seeking Debt Advice

If your mortgage is in arrears, consulting with a Licensed Insolvency Trustee can be beneficial. They can provide you with solutions to eliminate unsecured debt, so you have enough room in your budget to keep up with your mortgage payments. A Licensed Insolvency Trustee can help you assess whether you can financially afford to catch up on your mortgage arrears if your other debts are eliminated. If not, they can help you decide whether it makes more sense to sell.

In conclusion, dealing with a mortgage in arrears can be a daunting task. However, understanding your options and seeking professional advice can help you navigate this challenging situation. It’s crucial to act proactively and take control of the situation before your lender enforces their right to foreclose or force a sale.

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