As the cost of living rises, some homeowners are skipping meals or postponing bill payments in a struggle to meet mortgage payments and keep their homes.
If you’re in this 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 really want to take your home, said Adrian Schulz, mortgage broker with Centum Financial Services in Winnipeg.
“Nobody’s in the mortgage lending business,” Schulz said, adding that the first thing to do if you’re worried about making your mortgage payments is to talk to your lender about your situation.
“I think borrowers would be surprised at the number of options that will be presented.”
And just because you’re behind on your payment doesn’t mean you’ll be kicked out of your house immediately.
In Manitoba, lenders must wait until you’re at least a month late to start mortgage sale proceedings, said attorney Maria Grande, who has represented banks and credit unions in these situations.
Many will even wait a few more months to take action — and the whole process can take anywhere from six months to a year to complete, said Grande, a partner at Winnipeg law firm Thompson Dorfman Sweatman.
Lenders also have to give you several warnings along the way, each with a chance to get you out of trouble by working out a plan with them before the house goes up for sale — something lenders want, too, Grande said.
“You might be able to do something if you come to the table that isn’t available once you’re on that path with the mortgage sale process, [which are] much harder to stop,” she said.
What options do you have?
Homeowners can refinance their mortgage, which can significantly lower monthly payments, mortgage broker Schulz said.
On the one hand, you can extend the amortization period of your mortgage — the number of years of the mortgage — through refinancing. That means it will take longer to repay and you’ll pay more interest, but it can lower your monthly payments, he said.
And most mortgages have prepayment options, which can let you pay them off faster if you earn extra money, like a tax refund or an inheritance. This can help counteract the extended amortization period, he said.
“But at least you can sleep at night knowing your minimum monthly mortgage payment is considerably lower,” giving you more leeway to cover the rising cost of things like groceries and gas, a Schulz said.
Homeowners can also request to defer their mortgage payments.
But because lenders may view this unfavorably, it should only be done as a last resort, as 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 your debts and spending, but aren’t sure how to get back on track, it might be worth consulting a credit counselor.
They can reduce or eliminate some of your interest rates, help you pay off debt and give you the options that are best for you, said Brian Denysuik, interim CEO of Creditaid, a Winnipeg-based credit counseling agency. .
Depending on your situation, these choices may include changing from a variable interest rate mortgage to a fixed rate mortgage, postponing a foreclosure to assess your choices, selling your home, or referring to a trustee of bankruptcy, Denysuik said.
The first meeting at an agency like Creditaid is free, he said.
And non-profit options also exist, such as the Credit Counseling Society, which offers almost all of its services for freesays its website.
“It’s just a matter of getting the right people together to talk, looking at what tools are available, what other mortgage options are available, and going from there,” Denysuik said.
Does this also happen to other people?
Grande said she has seen an increase in mortgage sales proceedings at her law firm in recent months.
And as mortgages mature, interest rates climb and job problems persist, it’s a trend she expects to intensify by winter, if not more. fall here.
As the Bank of Canada’s benchmark interest rate hits 1.5% and gasoline prices reach record highs, Denysuik said he also sees more customers asking for money. help lately, many of whom feared they wouldn’t be able to meet their mortgage payments.
He said he expects this trend to continue in the coming months as well 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 seek help, the more options you have available,” he said.
“When it comes to the 11th hour, that certainly limits the options available, but that doesn’t mean there aren’t any.”