HOW TO PREVENT FORECLOSURE
Don’t ignore your lender! Reach out to your lender and mortgage broker as soon as you realize that you are having difficulties making your payments.
Defaulting on your mortgage is something you want to avoid if at all possible since it stays on your records and will prevent you from purchasing a home for at least the next 10 years. So, it is critical to talk to your lender—they may suggest some of the following options depending on your specific situation:
Ask for extra time to make up your payments
Since it is also in their best interest to have you make your mortgage payments, your lender may work out a repayment plan that is easier for you to manage. Every lender is different.
Ask for a mortgage loan modification
Some mortgages have an adjustable loan. If so, ask your lender if they can
- adjust the interest rate to a more manageable level
- extend the amortization period to lower the monthly payments
Re-calculate and refinance your mortgage
If you are able to meet the lender’s requirements and you have enough equity available, your lender may increase your loan balance (to include back payments) and re-calculate your mortgage loan.
Loan consolidation
Lenders would like to avoid foreclosure, the same as you would—it’s a very expensive and time-consuming process. Sometimes, if you are able to pay your other debts or consolidate them into a more manageable payment you will be able to make your mortgage payment.
ALREADY IN FORECLOSURE?
If you are already in foreclosure, your lender will give you a specific time period to catch up on your payments (all outstanding principal and interest in addition to late charges), pay the costs of filing the foreclosure (legal fees and inspection costs), and stop the foreclosure. This is called reinstating your mortgage.
If you are not able to reinstate your mortgage there are a couple of other options:
Sell your home
When you consider the complications of selling, moving, and possibly changing neighbours and schools, etc., it’s not necessarily the easiest option, although it is the most obvious one. It’s also important to note that if the sale of your house does not cover the amount owing on your mortgage you still may be required to pay the balance.
Rent your home
Renting your house out for more than your monthly mortgage and property tax costs is also an option, but you may have to move and it would be an additional cost. You would also have to be approved to rent somewhere else, which may be difficult if your credit is bad. Another consideration would be to rent out only part of the house, and hope that the added income helps you to meet your mortgage payments going forward.
RESOURCES:
Money Mentors offers credit counselling, money coaching and financial fitness classes (www.moneymentors.ca)
Credit Counselling Society offers free credit counselling and debt consolidation help (http://www.nomoredebts.org)
Consolidated Credit Counselling Services of Canada offers credit counselling and debt consolidation help (www.consolidatedcredit.ca)
