Many Canadians continue to struggle to make mortgage payments since the COVID-19 epidemic and the financial strain it caused is not close to being over. For a time, mortgage deferrals assisted, but those deferral periods have now come to an end. For most of the homeowners I encounter, their mortgage is the last debt they want to default on. They’ll go to any length to avoid mortgage arrears, including taking on additional credit and making their monthly mortgage payment. The difficulty with this strategy is that not only will you need to pay off your existing debts in addition to accrued interest, but leaving you with less money than before. So, what happens if you can’t afford your mortgage? The good news is that you have alternatives, some of which may assist you in keeping your house if that’s what you desire.
What Happens If You Stop Making Mortgage Payments?
Homeowners who took advantage of the deferrals allowed during the epidemic have been able to keep their payments up after deferral. However, the cost of this pay-freeze means that your future loan payments will be larger. If someone in your family is unemployed or your income has been cut, making larger payments may be difficult. Or you may have taken on other loans and credit throughout the epidemic, which has put you behind on your mortgage.
A missed payment isn’t difficult to catch up on, but numerous arrears might jeopardize your ability to keep your house. When you are behind on your mortgage payments, the terms of your loan agreement will outline what happens. If you have missed payments for three months or more, most mortgage lenders will regard you as being in arrears.
Lenders have a variety of methods to deal with property owners who stop paying their bills, including a power of sale or foreclosure. If you also owe condo fees or real estate taxes, the lender may pay them directly to the municipality and then add the amounts to the principle amount. The ideal approach to handle the scenario is to prevent your lender from foreclosing or forcing a sale before you lose control.
What Should You Do If You Have Been Months Behind On Your Mortgage?
If you’re behind on your payments but think you might catch up, contact your mortgage lender and ask for some extra payment forbearance.
If your mortgage lender has refused any further deferrals, you have three choices:
- Another mortgage lender may refinance you.
- You can also try selling your property yourself and getting out from under high mortgage payments.
- Consider a consumer proposal to help you round out your financial picture.
Your first step might be to consult with another mortgage professional about refinancing your current mortgage. Getting a new mortgage might be tough if you don’t fulfill the income requirements or have a poor credit score. Even with equity in your house and a decent credit score, without enough money to make monthly payments, remortgaging or refinancing may not be an option. Remember that dealing with a high-risk mortgage lender will result in higher interest rates.
You should not borrow more consumer debt to stay flowing. Unless you’re sure your situation is short term, avoid using credit cards or taking on a high-interest installment loan to make mortgage payments. It’s important to understand that if you have a lot of negative information on your report, it’ll hurt your credit score and make budgeting even more difficult.
You must first determine why you can’t afford your mortgage payment.
You may have to make a difficult decision between selling your house and getting smaller or renting. If you are behind on mortgage payments, you can sell your house as long as the lender has not already initiated a power of sale or foreclosure procedure. It might be more beneficial to have a say in the process rather than letting the lender choose for you.
If you are behind on your mortgage payments because of other debt, such as credit cards or a motor vehicle loan, you may want to consult with one of our representatives. We can help you get rid of unsecured debt by providing you with options to make ends meet while still paying your mortgage.
What Actions Can We Perform To Assist With A Mortgage In Arrears?
If you believe you can afford your house but not your other bills, a consumer proposal may be an option for you. Getting out of debt without having to sell your house is a possibility.
First and foremost, it’s important to realize that a consumer proposal does not cover secured debt. If you make your monthly payments on time, the mortgage lender will not force you to sell your house. You are under no obligation to terminate your mortgage, and if you continue to make payments, you may keep your home. Because you filed a consumer proposal or bankruptcy, your mortgage lender cannot foreclose on your house or suspend your loan.
A consumer proposal is a proactive method to deal with any other financial issues you may have while also improving your cash flow so that you can catch up and keep your future mortgage payments. A consumer proposal is a debt repayment plan that allows you to keep your house. You could negotiate a deal with your unsecured creditors to pay back a portion of what is owed by using this approach. The amount you pay is determined by your wages and the assets you may possess, such as any equity in your home.
Because the rules surrounding bankruptcy and home equity differ by province, you should contact a Licensed Insolvency Trustee in your area. In a consumer proposal, the trustee’s duty is to assist you in coming up with an offer that you can afford and that your creditors are likely to accept. A Licensed Insolvency Trustee will examine your budget, request a value for your home and other assets, and then work with you to determine how much to offer.
If your other debts are paid off, the trustee will also assist you in determining if you can afford to make up for any mortgage arrears that may have accrued while your other obligations were outstanding. If it doesn’t make sense, they can assist you in determining whether or not to sell.
Feel free to reach out to GTA Credit Solutions at any time! We are here to help you!
