Falling behind on a mortgage is stressful, and it tends to feel more urgent with every missed payment. The most important thing to know about mortgage arrears is that options shrink over time. Acting early, while you still have equity and a payment history to point to, gives you far more choices than waiting for a formal notice.
This page explains what to do first, how lenders view arrears and when a private mortgage can be part of a solution. It is general information, not legal advice.
Warning signs to act on
- You have missed one payment or are making payments late
- You are using credit cards or lines of credit to cover the mortgage
- Your income has dropped, or a separation, illness or job change has changed your budget
- You have received a demand letter or other formal notice
First steps
- Talk to your lender. Ask what relief is available, such as a payment deferral or a repayment plan.
- List everything you owe. Include arrears, fees, property tax and other secured debts.
- Get an idea of your equity. How much your home is worth compared with what is owed determines how many options you have.
- Look at the whole budget. Sometimes reducing other debt costs makes the mortgage manageable.
- Get advice early. If you receive a formal notice, speak with a lawyer promptly.
How a private mortgage can help
A private lender can pay out your existing mortgage, or bring arrears current, and replace it with a new mortgage secured on your equity. That can stop escalation and buy time to sell on your own terms, restructure your finances or recover income. Because private financing is more expensive than bank financing, it works best with a defined exit plan.
When it may not be the right move
If the payment on any new loan would be as unaffordable as the current one, or the equity is too thin, a new mortgage only delays the problem and adds cost. In that case a planned sale, downsizing or a debt solution through a licensed insolvency trustee may be better. We will tell you honestly if we think that is the case.
What we look at
Every arrears file gets a suitability and exit review before anything is recommended: the property value and equity, how far behind you are, the payment you can sustain, and how the new mortgage will end. You can estimate a payment with the Private Mortgage Payment Calculator. Related pages: Mortgage Renewal Problems and Debt Consolidation.
Frequently asked questions
Can I get a private mortgage if I am behind on my payments?+
It is often possible when there is enough equity in the property, because private lenders focus on the property rather than your payment history. Pricing and the maximum loan-to-value reflect the risk, and the file needs a realistic plan for how it will be repaid.
How long before my lender takes action?+
It varies by lender and by the terms of your mortgage, and it can move faster than people expect. That is why contacting your lender early and getting advice if you receive formal notice matters.
Will a new private mortgage stop the process?+
If it pays out or brings your mortgage current, it can resolve the arrears with the existing lender. It replaces that problem with a new mortgage, so the payment must be affordable and the exit plan clear.
What if I cannot afford any new mortgage payment?+
Then a new loan is unlikely to solve the underlying issue. Selling the property, downsizing or speaking with a licensed insolvency trustee may be better options. We will discuss them openly.
What does it cost to fix arrears with a private mortgage?+
Expect a higher interest rate than a bank, plus lender, broker, legal and appraisal costs, normally paid from the proceeds. The calculator gives an estimate, and we confirm actual costs once we understand your file.
NOW Mortgage is a RECA-licensed brokerage operating under Dependable Mortgage Solutions Corp. Call 587-200-6727 or email lending@nowmtg.ca. Information on this page is general in nature and is not a commitment to lend. Financing is subject to lender approval, property assessment and final documentation. OAC.