Behind your Mortgage payments
What to do, when you miss or fall behind your mortgage payments? It happens to lot of Canadians. 61% of Canadians do not know what options are available to them if they miss or are behind on a mortgage payment in a situation that could leave them in the bad books with their bank, and at the mercy of creditors. If you fall behind your mortgage payments, the very first thing you should do is call the mortgage lender or bank who loaned you the money in the first place (your mortgage lender). Even if you know the cash-crunch is coming down the road — say, you lost your job but have enough saved up to get you through the next three months — call them now and disclose your circumstances fully.
Few Canadian lenders have a skip a payment plan but it also has a provision to allow you to take a leave from your mortgage because of a change in circumstances.
If you are behind your mortgage payments, follow these steps:
The first step to getting back on track is to determine how your money problems started. Can you catch up on your mortgage payments over the next couple of months or are your debt problems more permanent. Take a look at our warning signs of debt problems to see just how serious your situation really is. Be honest with yourself.
In order to keep you in the house and making regular payments, your bank might be willing to renegotiate your mortgage rate and terms. If not, contact a mortgage broker to see if they can find you another lender who will. There will likely be penalties for breaking your mortgage, but the monthly savings could outweigh those and more.
The lenders will usually look at a number of different situations including:
1. A longer amortization period to lower monthly payments
2. Switching from a variable rate to a fixed mortgage to provide a consistent payment plan you can budget for without fear of any future interest rate increase
3. Refinancing your first mortgage
4. Arrange second mortgage
5. There may be an option for a payment holiday or adding missed payments to the back of your current mortgage
6. Skip a payment plan
If your other debts are preventing you from being able to make your mortgage obligations, a bankruptcy trustee can help you arrange a consolidated loan, rolling multiple, high-interest loans into one, lower-interest payment. In some provinces, you may be able to arrange a formalized consumer proposal to organize your debts at more favorable terms.
You may not need a car, motorcycle or boat when you are going through a difficult time. You may withdraw cash from your registered retirement savings plan if you have one. Be creative and remain open for all options. Seek the advice from the experts instead of a family, friend, bartender, barber or neighbors.
There is lot of Canadian real estate angel investors who could buy part of the ownership of your house. These joint venture agreements can be life saver. It is another option to consider. This option works very well for Canadian real estate investors for investment properties.
Rental income may be the secret to your budget shortfall. Your bank may even be willing to loan you money to create an extra apartment in your home, provided you can show that rents in your area would justify the cost.
If it’s a potential option, consider asking family for some support. It could be in the form of a gift, or a loan with a structured repayment plan. If you’re behind your mortgage payments, odds are you’re also behind on your property tax, utilities, and other bills.
If none of the above will solve your debt woes, sell your home and use the proceeds to pay off your debts. But don’t wait for the bank to do it. Simply ignoring the reminder notices your lender sends will not stop them pursuing legal action to repossess your home. You’ll not only shut yourself out of the legal process, you’ll get little to no notice of when the bank will sell the property or how much they’ll ask for. (They’ll lowball it for a quick sale, and most bidders will as well.) Even if you don’t have much (or any) equity in the home, selling it yourself helps avoid having your credit report labeled with the stigma of “foreclosure.”
If you face exceptional circumstances such as parental leave, temporary lay-off with recall, or other unexpected expenses you may consider skipping up to 4 consecutive months of mortgage payments once during your mortgage term.
The Extended Skip-A-Payment option is subject to credit approval. It is offered with Conventional and Genworth mortgages, except for those with terms of 10 or 25 years. The mortgage must be up to date and the current balance, together with the amount of the payment you wish to skip, cannot exceed the original amount of your mortgage
Borrow from Canadian Hard Money lenders: There are lots of Canadian angel investors as well as hard money lenders. They do not care about your credit score or your income. They lend their money against the asset which can be your home. There rates might be higher but it is good short term solution.
It makes sense to sell it at discount price to a Canadian professional real estate investors for all cash with fast closing. You save real estate commission, penalty and legal fees etc if your house goes on power of sale or foreclosure. Saving your credit should be a great consideration as well.
Your mortgage professional wants to establish and maintain a positive relationship with you over the long term, and is fully trained and equipped with the tools to help you deal with the temporary financial setbacks that you may be facing.
For mortgages insured by Canada Mortgage and Housing Corporation (CMHC), CMHC provides mortgage professionals with tools and the flexibility to make timely decisions when working with you to find a solution to your unique financial situation. These tools include:
• Converting a variable interest rate mortgage to a fixed interest rate mortgage in order to protect you from a sudden interest rate increase, should one occur.
• Offering a temporary short-term payment deferral. Your mortgage professional may be prepared to offer greater payment flexibilities, particularly if previous lump sum prepayments have been made, or if you have previously chosen an accelerated payment schedule.
• Extending the original repayment period (amortization) in order to lower your monthly mortgage payments.
• Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period.
• Offering a special payment arrangement unique to your particular financial situation.
CMHC is also willing to consider other alternatives proposed by the mortgage professional to resolve or avoid mortgage payment default. In every case, the options available will depend upon your individual financial circumstances.
The worst-case scenario is a power of sale, a foreclosure method used in Ontario and some other provinces that can have you out of your home in less than two months once it gets rolling.
It gives the lender the right to sell the property to recover the outstanding balance of your mortgage loan. Once the lender is paid, the new owner takes possession, and you get the balance. According to Ontario’s Mortgages Act, power of sale action can begin in as few as 15 days from default.
The bottom line: There isn’t a hard-and-fast course of action in the early stages, and the sooner you act, the better it’ll go.
The best chance to stay in the home, save your credit rating, and save yourself a huge hassle is to take action before the lawyers’ demand letters start coming through the mail slot.
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