As the cost of living rises, some homeowners are skipping meals or putting off paying bills in a struggle to keep up with mortgage payments and hold on to their houses.
If you’re in that situation, experts say the sooner you act, the better — and you may not even realize how many options you still have.
It’s also important to understand that lenders like banks and credit unions don’t actually want to take your house away, said Adrian Schulz, a mortgage broker at Centum Financial Services in Winnipeg.
“Nobody is in the loan-to-own business,” Schulz said, adding the first thing you should do if you’re worried about making your mortgage payments is talk to your lender about your situation.
“I think that borrowers would be surprised to see the number of options that will be presented.”
And just because you’re behind on payments doesn’t mean you’ll be kicked out of your house immediately.
In Manitoba, lenders have to wait until you’re at least a month behind to start mortgage sale proceedings, said lawyer Maria Grande, who has represented banks and credit unions in those situations.
Many will even wait a few months longer to act — and the whole process can take six months to a year to wrap up, said Grande, a partner at Winnipeg law firm Thompson Dorfman Sweatman.
Lenders also have to give you several warnings along the way, each one a chance to get yourself out of the situation by working out a plan with them before the house gets to sale — which is what the lenders want too, Grande said.
“You might be able to do something if you come to the table that would not be available once you’re down that path with mortgage sale proceedings, [which are] much more difficult to stop,” she said.
What options do you have?
For one thing, you can extend your mortgage’s amortization period — the number of years of the mortgage. That means it will take longer to pay off and you’ll pay more interest, but it can lower your monthly payments, mortgage broker Schulz said.
Homeowners can also refinance their mortgage, which can bring down monthly payments significantly, he said.
And most mortgages have early payment options, which can allow you to pay them down faster if you happen to come into some extra cash, like a tax refund or inheritance. That can help counteract the extended amortization period, he said.
“But at least you can sleep at night knowing that your minimum monthly mortgage payment is considerably lower,” which gives you more breathing room to cover the rising cost of things like groceries and gasoline, Schulz said.
Homeowners can also ask to defer their mortgage payments.
But because lenders can view that unfavourably, it should only be done as a last resort, since it can negatively affect your future borrowing options, he said.
What if you don’t know what to do?
If you’re struggling to keep up with debts and expenses but don’t know how to get back on track, it could help to see a credit counsellor.
They can reduce or eliminate some of your interest rates, help you repay your debts and give you the options that make the most sense for you, said Brian Denysuik, interim CEO of Creditaid, a Winnipeg-based credit counselling agency.
Depending on your situation, those choices can include changing a mortgage with a variable interest rate to one with a fixed rate, delaying a foreclosure to assess your choices, selling your house or being referred to a trustee in bankruptcy, Denysuik said.
The first meeting at an agency like Creditaid is free, he said.
And non-profit options exist too, like the Credit Counselling Society, which offers almost all its services for free, its website says.
“It’s a matter of just bringing the right people together to have the conversation, looking at what tools are available, what other mortgage options are available and moving forward from there,” Denysuik said.
Is this happening to other people, too?
Grande said she’s seen an uptick in recent months in mortgage sale proceedings in her law practice.
And as mortgages mature, interest rates climb and employment challenges persist, it’s a trend she expects to intensify by winter, if not by fall.
With the Bank of Canada’s benchmark interest rate up to 1.5 per cent and gas prices reaching record highs, Denysuik said he’s also seeing more clients coming in for help lately, including many worried about keeping up with their mortgage payments.
He said he expects that trend to continue over the coming months too, and hopes more people will start asking for help as soon as they realize they need it — even if they think it’s too late.
“The sooner you look for assistance, the more options you have available,” he said.
“When it’s down to the 11th hour, it certainly limits the options available, but it doesn’t mean that there are none.”