Nora Dunn
Kurt Woock
Beth Buczynski
Economic challenges — high interest rates, persistent inflation — have led to a rise in mortgage delinquency in some provinces, according to recent analysis by Equifax Canada.
Missed mortgage payments can happen, whether by mistake or because you’re having trouble coming up with the money. Regardless of the cause, the sooner you address the situation, the better.
What happens if you miss a mortgage payment?
Mortgage lenders can take legal action after the 15-day grace period, but that rarely happens. Instead, the sequence of events tends to progress through the following steps.
You’ll pay late fees
Your mortgage contract will state the late fees and terms applicable to your mortgage. Fees tend to range from $25 to $50 and can be charged as soon as the payment is missed.
Your credit score might drop
After 30 days, your lender will report your missed payment to the credit bureaus. Each credit reporting bureau (Equifax and TransUnion) has its own way of calculating your score, but a history of on-time payments (or not) plays a big part. The more overdue your payment is, the more detrimental the effect will be on your score.
Even after you make up for the missed payment, a late payment stays on your credit report for up to seven years.
You might go into default
If you haven’t made a payment by 30 days after your due date, your mortgage will go into default. This is a serious situation that can seriously hurt your credit score and lead to foreclosure.
You could lose your house
Your home is used as collateral for your mortgage. When a lender doesn’t get their payments, they can legally repossess the home and sell it to recoup their losses. This is known as foreclosure.
Foreclosure
The foreclosure process varies by province. In British Columbia, Alberta, Saskatchewan, Manitoba, Quebec and Nova Scotia, it is known as judicial sale or judicial foreclosure. It’s a lengthy process that goes through the court system over the course of up to six months.
Foreclosure results in the title of the house being transferred to the lender, who then keeps all the proceeds from the sale.
How many mortgage payments can you miss before foreclosure in Canada?
Foreclosure is a long and expensive process, so it’s not triggered immediately upon missing a mortgage payment. Once you stop making payments, you’ll likely get letters from your lender after 30, 60 and 90 days. If you haven’t responded to these letters after 90 days, then foreclosure proceedings will begin.
Power of sale
Newfoundland, New Brunswick, Prince Edward Island and Ontario use the power of sale process rather than the foreclosure process.
Power of sale begins with a notice sent by the lender that gives you 35 days to catch up on missed payments. If you get back on track, the process stops, and you don’t lose your home. You’re still responsible for paying associated fees, and your credit score still takes a hit.
If you don’t rectify the situation within the 35-day period, transfer of ownership to the lender through power of sale begins. Power of sale doesn’t go through the court system, and it happens significantly faster than judicial foreclosure.
How late can a payment be before it’s ‘missed’?
Most Canadian lenders will give you a 15-day grace period before your mortgage payment is considered to be missed. This grace period means your payment isn’t missed until it’s 15 days late — and you typically won’t be on the hook for late fees until after this time.
If you haven’t made a payment by 30 days after your due date, the lender will report the missed payment to the credit bureaus. This is when the consequences start increasing in severity.
What is a “rolling late”?
Missing a mortgage payment and skipping a payment are separate matters. If you miss a mortgage payment one month, then resume paying the next month (effectively skipping the missed payment), you’re not back on schedule. The next payment is considered a late installment of the originally missed payment.
Until you double up on your mortgage payments to make up for the missed payment, you’re in a “rolling late” situation where every subsequent payment is considered late. This means you’ll be charged late fees every month, and it can have a big effect on your credit rating.
The way to avoid a rolling late predicament is to make up for the missed payment as soon as possible, then resume your regular payment schedule.
Think you’ll miss a mortgage payment?
Be proactive
The more proactive you are, the better. If you think you’re about to miss a payment, contact your lender right away. They’re more likely to strike a deal and lessen the consequences of a missed payment if you let them know beforehand rather than waiting until after you miss the payment.
Make a payment ASAP
Depending on the circumstances, the lender may allow you to make a late payment (with or without a fee). If your situation is more serious, they may help you design a repayment plan, adjust the mortgage (such as by extending the amortization), get a second mortgage or even arrange for a deferral.
What to do if you’ve already missed a mortgage payment
Again, the sooner you open the lines of communication with your lender, the more options you’ll have to work with them so you can continue to afford the mortgage and keep your home.
If your financial situation has changed dramatically and you don’t think you’ll be able to afford your mortgage payments going forward, you may want to consult a lawyer or mortgage broker for advice. Foreclosure and bankruptcy are worst-case scenarios with long-term consequences for your credit, so if you’re in danger of foreclosing, you may want to consider selling instead.
DIVE EVEN DEEPER
The Best Mortgage Rates in Canada
Quickly explore Canadian mortgage rates from bank and non-bank lenders. Find the best fixed or variable mortgage rate for your home buying needs.
Clay Jarvis
Mortgage Payment Calculator
Use our mortgage payment calculator to estimate your monthly mortgage payments in Canada. Enter your loan details to get an accurate and quick assessment of your mortgage costs.
Help! My Mortgage Is up for Renewal, But My Finances Have Changed
A change in income or credit score can affect how you approach renewing your mortgage.
Mortgage Arrears Rates Are Up in These Cities: Here’s What You Can Control
Taking stock of your financial health and being candid with your lender can help you protect your home and credit.