Let’s face it. Unexpected financial situations can happen, making it difficult to meet our monthly mortgage payments. It’s important to know that you’re not alone, as many other Canadians have and are facing similar circumstances. The good news is that there are options for you. The best thing you can do is connect with a mortgage professional – likes ours at Homewise – to discuss the best course of action.

You can’t miss a payment but you can skip a payment.

Being able to skip a mortgage payment will depend on the mortgage terms set out by your lender. Some lenders may allow borrowers to skip one to four payments per year – which offers the flexibility to adjust your budget and get back on track. However, when you skip a monthly payment, the interest will be charged and added to your total mortgage balance – which you will be required to pay over time.

If you’re having trouble paying your mortgage, here’s what we recommend:

Get a short-term mortgage payment deferral

If you communicate to your lender that you’re having a hard time paying your mortgage, they might agree to pause payments for a certain amount of time – known as a mortgage payment deferral. A mortgage payment deferral essentially allows you to delay your mortgage payments for a defined period of time. After that period ends, you must resume making your mortgage payments and will also have to repay your deferred payments.

Extend your original amortization period

If you're facing a situation where you can no longer make your monthly payments, another option is to extend the amortization period of your mortgage at renewal. Your amortization period is the length of time in which your payments are spread out. By taking longer to pay your mortgage, you can reduce your monthly payments and make them easier to manage. It’s important to note that a longer amortization period means you’ll be paying more interest over the long-term. To note, this is something that can only be done at the end of your term, or if you break your mortgage early (which would include a penalty).

Switch from a variable-rate to a fixed-rate mortgage

If you currently have a variable-rate mortgage and are finding it hard to make payments as rates increase, speak with a mortgage professional like ours at Homewise. We’ll help you navigate the market to potentially find a better option that suits your financial situation. Converting from a variable-rate to a fixed-rate mortgage will protect you from unexpected rate hikes and give you greater control over your budget – ensuring that you can afford your mortgage, and relieving some of your stress. Also, in certain environments, fixed rates are lower than variable, so you could benefit from the savings.

What happens if you’re unable to make payments over time?

In the event that you’re unable to pay your mortgage, your lender has the authority to seize the property and resell it through what is called “a power of sale.” A power of sale is a clause that allows lenders to sell a borrower's property if they default on their mortgage payments. If the lender notices consistently missed payments over a period of time with no explanation from the homeowner, they will be prompted to contact them to address the situation.

What’s the difference between a power of sale and foreclosure?

Similar to a power of sale, there is also a course of action called foreclosure. If you frequently fail to make your mortgage payments, a foreclosure gives your lender the authority to become the immediate owner of your home. In contrast, a power of sale requires your lender to sell the home to the highest bidder. Any proceeds from the sale of the home would override the homeowners debt and if any funds remain, you are permitted to keep them while the lender keeps possession of the property. If your home doesn’t sell for a higher value, you (the previous homeowner) would be responsible to pay any remaining debt.

Get ahead by connecting with a realtor

If you’re behind on your mortgage payments and have been contacted by your lender to discuss the situation, get in touch with a realtor as soon as possible. They may be able to help you sell your home before your lender has the ability to seize the property and sell it themselves. At Homewise, our team of experienced real estate agents can help you sell your home quickly and at a favourable price.

Every homebuyer and homeowner’s financial situation is different. That’s why our team of dedicated mortgage professionals takes the time to understand our clients’ unique needs to guide them in the right direction. If you’re having difficulties making your mortgage payments and want to learn more about the options available, connect with us today.