What to Do Right if You Miss a Mortgage Payment

There is a lot of risk of missing a mortgage payment. In Canada, missing a month’s mortgage payments has implications but may not be as harsh as you think. Each lender’s policy on missing payments can be different, but here’s what you can expect or do. 

What If I Miss A Mortgage Payment?

Missing a mortgage payment is not a disaster, but it can have adverse effects. Banks and lenders often call or send letters by mail if they miss a mortgage payment. This first contact reminds you that you are contractually obligated to repay the loan and helps inform you that your recent payment has not been processed. Please do not ignore this call or letter.  

This is when you need to talk to your private loan lenders in Ontario, Canada. They may temporarily hold your automatic payments or want to make catch-up payments from your currently registered bank account. The lender may plan to try to collect the payment again later or request a “double payment” for the next payment. Still, if you ignore the situation, the impact will be immediate and can be a big problem. 

You will probably see registered mail escalating with foreclosure warnings by email. Also, keep in mind that some lenders charge late fees. This is usually detailed in mortgage contracts. 

What If I Haven’t Paid Several Times? 

The first response from the lender is to report you to a credit bureau that tracks individual credit scores. This flag against you can drop your credit score. Depending on your score, you may find it challenging to get a loan, or you may not be able to get the lowest mortgage interest rate and be forced to pay the loan. The lender will not stop reporting your late payment. 

Suppose the debt collection team is likely to intervene, and no solution is found. In that case, the lender can proceed with the legal process of foreclosure of the home. In this case, the judge will hear allegations that you have violated your mortgage contract. The lender should have the right to sell your home, which is the underlying asset, to recover the loss because of the breach.

What to Do?

1. Contact your lender immediately 

Contact your lender immediately if you think you may miss a future payment. Some lenders may offer to skip payment options that allow you to cut or defer one or more payments without penalty. Other lenders may have programs to help clients get back on their feet.

2. Address potential future problems 

If you think you won’t be able to pay your mortgage for the foreseeable future, such as unemployment or other financial hardships, contact your lender immediately. Most lenders and even mortgage insurers such as Turnedaway.ca offer initiatives to help homeowners who are temporarily unable to pay their mortgage. 

3. Set and forget  

Sometimes a missed mortgage payment isn’t due to financial problems but simply because the homeowner was on vacation and forgot to make the payment. Avoid this by setting up a checking account with automatic monthly payments to your lender. If you have a variable rate mortgage where payments can fluctuate, be careful and be prepared for changes in automatic payments. 

Final Thoughts 

Don’t panic if you miss a mortgage payment. Avoid credit score hits, debt collector misery, potential bankruptcy, and foreclosure by being proactive, connecting with lenders, and setting up processes to make mortgage payments easy and automatic. If you can’t pay, consider selling and downsizing for now until you get back on your feet.