Falling behind on mortgage payments is one of the most stressful financial situations a homeowner can face. If you are worried that you might not be able to make your next payment, you are not alone. Many Canadians experience financial setbacks due to health issues, job loss, or unexpected expenses. The good news is that there are options available, and the earlier you act, the more choices you’ll have.
Assess Your Current Situation
The first step is to take a clear look at your financial picture. Write down what you owe, what you own, and what your income looks like today. If you own a condo or house, you may have significant equity, even if your budget is stretched to the breaking point. Equity means the difference between what your property is worth and what you still owe on the mortgage.
For example, if your condo could sell for $500,000 and you only owe $200,000 on the mortgage, you have $300,000 in equity. That equity gives you options, even if your credit cards and line of credit are maxed out.
Contact Your Lender Early
If you think you are going to miss a payment, call your lender before it happens. Lenders in Ontario are often more flexible than homeowners expect. They may be able to:
- Offer a short-term deferral
- Extend your amortization to lower your payments
- Allow an interest-only payment arrangement for a period of time
The earlier you contact your lender, the better chance you have of working out an arrangement. Waiting until after you’ve defaulted usually makes the situation harder.
Consider Refinancing
If you have equity in your home, refinancing may give you a lifeline. Refinancing means replacing your existing mortgage with a new one, potentially at a better rate or with more favourable terms. The funds from refinancing could be used to pay off high-interest credit cards or lines of credit, which may free up hundreds of dollars each month.
You can learn more about refinancing or even start an application online through our mortgage application page.
Selling the Home
Sometimes, selling is the best option, especially if your mortgage and other debts have become unmanageable. Selling allows you to pay off your mortgage and other debts, and if you have enough equity, you will still walk away with funds to start fresh.
If you are worried about closing costs, remember that those are typically deducted from the proceeds of the sale. You do not necessarily need cash in hand before selling.
“Cash for homes” companies are another option, but they usually pay below market value. They can provide a fast sale, but it often means leaving significant money on the table compared to listing your home with a real estate agent.
Alternatives to Default
Defaulting on a mortgage should always be the last resort. In Ontario, default can lead to power of sale or foreclosure, which will damage your credit for years. Instead, consider:
- Consumer Proposal: A legally binding agreement with your creditors that can lower your debt payments. We have a full article on getting a mortgage while in a consumer proposal
- Debt consolidation through refinancing: This may be more affordable than making multiple payments at higher interest rates.
- Government programs: Check if you qualify for provincial or federal relief measures.
Don’t Wait – Get Support
If you are stressed, overwhelmed, or unsure what your options really are, talking to a mortgage broker can help. At The Local Broker, we work with all major lenders in Ontario, as well as alternative and private lenders. That flexibility means we can often find solutions that your bank might not offer.
You don’t have to figure this out alone. Start a confidential conversation with us today by visiting our contact page.
