Read this first

This page explains your options. It will not push you toward a form. If you have received a legal notice, speak to a lawyer or a Licensed Insolvency Trustee as well.

Who this is for: Homeowners anywhere in Canada who have missed, or expect to miss, a mortgage payment and want to understand the choices before anything is signed.

On this page

Falling behind on a mortgage feels like standing at the edge of something. It is serious, and it is also more common and more fixable than most people expect. This page is general information, not legal or financial advice. It covers Canada as a whole, and the rules for what a lender may do next differ by province.

What arrears means

Arrears are the payments you owe and have not made. The Financial Consumer Agency of Canada explains that missing a regular payment is one way a mortgage goes into default, which means not following the terms of the agreement. Once in default, the lender has the legal right to recover what it is owed, and that can eventually lead to a forced sale of the home.

Eventually matters. A default is not a sale. Between the first missed payment and any sale there are letters, calls, legal notices and, in most cases, weeks or months. That gap is your working time.

What banks are expected to do

The same agency says banks should watch for early signs of default and contact you if you are at risk. It lists relief measures a bank may use: waiving some fees for a limited period, not charging interest on interest for a limited period when a measure causes negative amortization, and waiving a prepayment penalty on a lump sum paid to avoid negative amortization or when selling your main home.

A bank can also extend your amortization, which means stretching the repayment over more years. The agency warns that this can add tens of thousands of dollars to the total cost, and advises thinking twice before extending only to lower payments. Before you agree to any relief, the bank must clearly show the balance, the cost in dollars, the effect on amortization, the new payment and rate, and the date it takes effect, and it needs your express consent.

Those expectations describe banks. A private or smaller lender may offer less, so ask rather than assume.

What you can do now

Start with a one page list: your monthly income, what the mortgage costs, and every other debt with its minimum payment. Then take three steps in order.

First, call the lender before the next payment is due. Say what happened, whether it is temporary, and what you can pay now. Ask for the arrears figure in writing, and ask what relief it can offer. Write down the date, the person’s name and what was said.

Second, check for money you may have overlooked: insurance benefits, a tax refund, a family loan with clear terms, or a line of credit you can use for a short period. Be careful with anything that trades a short problem for a long one.

Third, decide whether the problem is a gap or a shortfall. A gap is a temporary hole, such as a layoff that has ended. A shortfall means income no longer covers the mortgage even when everything else goes right. Gaps can be bridged. Shortfalls need a different plan.

Who to speak to first

If a legal notice has arrived, a lawyer first. They can read your mortgage and the notice, and tell you how the rules in your province apply. A legal clinic or a bar association referral line can help you find one.

If other debts are part of the pressure, a Licensed Insolvency Trustee is the next call. The Office of the Superintendent of Bankruptcy says a consumer proposal is open to people whose debts total $250,000 or less, not counting a mortgage on the home you live in. In a proposal you keep your assets if you keep paying your secured creditors, and once it is filed you stop paying unsecured creditors and garnishments and lawsuits are stopped. The office also notes that trustees usually do not charge for a first meeting.

A credit counsellor is a gentler first step for some people. The Financial Consumer Agency of Canada says talking to one does not affect your credit score and that reputable agencies do not charge for the first meeting. It also says a debt management plan usually covers unsecured debts like credit cards, not mortgages, so a plan may free up cash for the mortgage but will not repair arrears on its own.

The ways this can end

Most outcomes land in one of five places. You catch up through a repayment plan with the lender, as in the worked example above. You catch up with outside money, such as savings, family help or a new loan. You change the loan, through a different lender or a longer amortization. You sell the home on your own timeline, which the agency lists as an option when someone is in severe difficulty. Or the lender enforces its security, which is the outcome everything else is trying to avoid.

Selling feels like failure, so people delay it. A planned sale with a real estate agent and time to market the home usually leaves more in your hands than a rushed one.

Where a second mortgage fits, and where it does not

A second mortgage is a second loan on your home, and you keep paying the first mortgage as well. The Financial Consumer Agency of Canada notes that lenders usually lend up to 80% of the home’s appraised value minus the mortgage balance, that rates are usually higher than on a first mortgage, and that if you cannot repay, you may face serious consequences including foreclosure.

It can fit when the arrears are a gap, the income has recovered, and the first mortgage payment is affordable again afterwards. It does not fit when the budget is already broken. Borrowing to catch up adds a second payment, plus fees for the appraisal, title search, title insurance and legal work. Run the numbers with the calculator first, and read how Ontario’s power of sale process works if a notice has arrived.

What not to do

Do not stop answering the lender. Silence is what turns a manageable arrears into a legal file. Do not pay a fee up front to anyone promising to stop enforcement or erase the debt, since the agency warns against claims that a company can quickly erase debt. Do not sign a loan offer the day you receive it, and do not move money between bills without writing down where it goes.

If you want to talk to a licensed mortgage professional about refinancing or a second mortgage after you have spoken to a lawyer or trustee, you can check your options. It is a request, and you can say no.

Spreading three missed payments over twelve months with the lender

Made-up figures. The mortgage payment is $1,850 a month, three are missed, and the lender adds an assumed $150 in late charges. This assumes the lender agrees in writing to spread the arrears evenly over twelve months, with no extra interest, which a lender is not required to do.

Three missed payments
$5,550

3 x $1,850

Late charges
$150
Total arrears
$5,700
Extra each month for twelve months
$475

$5,700 divided by 12

Regular mortgage payment
$1,850
Monthly payment while catching up
$2,325

A repayment plan can clear the gap with no new debt, but the budget has to carry $475 more every month. If it cannot, a longer plan, a sale or an insolvency option may fit better than a loan.

Illustration only. The figures are made up to show the arithmetic. They are not a quote, a rate or an offer.

Questions people ask

Is one missed mortgage payment already arrears?

The Financial Consumer Agency of Canada describes a missed regular payment as one way a mortgage goes into default. Your agreement defines the exact terms, and some lenders charge a fee straight away. Contact the lender the same week and ask what has been recorded.

Will my lender tell me what relief it can offer?

Banks are expected to watch for early signs of default and contact you, and to offer suitable relief measures as soon as possible. If yours has not, call first. A private lender may not follow the same expectations, so ask what it will agree to in writing.

Does a debt management plan cover my mortgage?

The Financial Consumer Agency of Canada says these plans usually cover unsecured debts like cards and lines of credit, and typically not mortgages or car loans. A counsellor can confirm which of your debts a plan would include.

Can I keep my home if I file a consumer proposal?

The Office of the Superintendent of Bankruptcy says you keep your assets in a proposal as long as you keep paying your secured creditors, which includes the mortgage lender. A proposal does not by itself fix missed mortgage payments. Ask a Licensed Insolvency Trustee how arrears would be handled.

Should I stop paying other bills to catch up on the mortgage?

Not without a plan. Falling behind on utilities, tax or support can create new problems. A free first meeting with a Licensed Insolvency Trustee or a credit counsellor can help you rank which bills matter most before you move money around.

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