What To Do If You Can’t Pay Your Mortgage Anymore

For ages, Canadian society has sold the dream of owning a home as a surefire way to security and success. And of course, becoming a homeowner can be very exciting. But what happens when financial circumstances shift, and you find yourself unable to keep up with mortgage payments?

The fear and stress of potentially losing your home can be overwhelming — especially in today’s era of higher interest rates. So here are some steps you can take to navigate this challenging situation.

Here's what to do if you can't pay your mortgage anymore:

1. Assess Your Financial Situation

The first step is to take a hard look at your finances. Evaluate your income, expenses, savings, and any other assets you may have. It’s also important to determine if your inability to pay is temporary or likely to be ongoing. No matter why you've fallen behind, identifying the root cause is key to getting back on track.

2. Communicate With Your Lender

Normally, there’s a 15-day grace period when it comes to mortgage payments. But once those 15 days elapse, you will be subject to late fees for missed payments. So don't wait until you've missed multiple payments to reach out to your mortgage lender. It’s always in your best interest to contact them as soon as you anticipate difficulty in making payments, as sometimes you can work with your lender to catch up.

3. Make Alternative Payment Arrangements

There are a few options for catching up on mortgage payments and any interest or late fees.

One of the options is a short-term mortgage payment deferral, which allows you to put off payments for a bit and pay them back later. This will include any interest that accrues during the deferral period.

Some lenders may offer you forbearance plans, where you can make smaller payments or no payments at all for a set period.

Another option is to extend your mortgage repayment period. By extending the amortization, you can lower your monthly mortgage payments, ultimately making them more manageable.

Your lender might let you add missed payments to your mortgage balance and spread them out over the remaining term. This will increase your total mortgage amount, but give you some temporary breathing room.

4. Explore Government Assistance Programs

There are some government programs designed to assist homeowners facing financial hardship. These programs may include loan modification options, refinancing assistance, or other financial aid.

For example, some municipalities (like Toronto) offer property tax deferral programs. Or they can help pay your utility bills.

There are also government programs that can help with other debts, like student loans. This could help free up some funds to keep up with your mortgage payments.

5. Seek Advice from a Housing Counsellor

Housing counsellors can provide invaluable guidance during difficult times. These professionals are trained to help homeowners understand their options and navigate the complex process of dealing with mortgage issues.

6. Consider Alternatives

If staying in your home becomes financially unfeasible, consider alternative options such as selling the property or exploring rentals. Downsizing or relocating may provide relief from financial strain and allow you to regain stability.

7. Know Your Rights

Educate yourself about foreclosure proceedings and your legal rights as a homeowner. Understand the timelines involved in the foreclosure process, and be prepared to take action to protect your interests if necessary.

For a mortgage in Toronto, there are two ways foreclosure may happen — the power of sale or judicial sale.

Power of Sale

Power of sale is the more common type of foreclosure in Ontario. If you can't keep up with your mortgage in Toronto, your lender can take over your home. You’ll be evicted, and the lender will sell the place to try to make up for what you owe.

With a power of sale, things move pretty fast. The process starts just 15 days after you miss a mortgage payment, with no need for the courts to get involved. After about 35 days, you could be evicted, and the bank takes over the property.

Once the bank has the property, they'll sell it at market value, or as close as they can get.

Judicial Sale

Whereas with a judicial sale the lender takes you to court. You'll receive a letter demanding payment. If you can't pay up within 30 days, the lender can ask the court to sell your property.If the court gives the go-ahead, your place goes up for auction. Once it's sold, an eviction notice is posted and the borrower is immediately forced to vacate.

There's a bit of leeway with judicial sales, though. If you can almost make your payment but need a bit more time, get in touch with your lawyer or the court right away. They might be able to give you an extension.

8. Plan for the Future

Once you've addressed the immediate crisis, focus on rebuilding financial stability. Create a budget and prioritize expenses. Take steps to strengthen your credit and prevent future financial difficulties.