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Arrears
Arrears are missed mortgage payments that are past due. In Canada, a mortgage slips into arrears the moment a scheduled payment goes unpaid, even if it’s only one, and while that isn’t the same as default, letting it linger turns a missed payment into default after 90 days.
Arrears Quick Facts
- A mortgage payment is missed past its due date
- One missed payment is enough to count
- Catching up quickly usually restores good standing
- Left unpaid, arrears can lead to default and enforcement
- Lenders watch arrears as an early warning sign
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What Mortgage Arrears Mean in Canada
Arrears is just the formal term for being behind on your regularly scheduled mortgage payments. The day a scheduled payment passes its due date without clearing, your mortgage is in arrears, even if you’re only one payment short.
Plenty of people slip into short-term arrears after a hiccup, a payment that bounced, a transfer that did not go through, or a tight month, and they clear it up within days. Being behind is not the same as mortgage default, the deeper breach that can eventually lead to a power of sale or foreclosure, depending on the province. What matters is that arrears signal rising risk to a lender, and they tend to snowball if left unremedied.
Why Arrears Matter for Mortgages
A missed payment usually costs more than the payment itself. Your lender can report it to the credit bureaus, and a lower credit score makes your next mortgage renewal, refinance, or loan harder to get and pricier when you do get one. Reaching out early almost always leaves you more room to work than going quiet does.
On the lender’s side, the longer a mortgage remains in arrears, the more formal matters become. The Financial Consumer Agency of Canada (FCAC) describes the endgame plainly: “Mortgage default happens when you don’t follow the terms of your mortgage agreement,” and once a missed payment hardens into default, the lender gains the right to recover what it is owed. Arrears rates are also a figure lenders and regulators watch to read how much stress borrowers are under.
How Mortgage Arrears Unfold
Left unresolved, arrears tend to move through a few stages.
You missed a payment. The mortgage is in arrears the day after the due date. Pay the overdue amount now, and you are usually back in good standing with little fuss.
Your lender makes contact. The lender sends reminder notices and a phone call, and sometimes a late fee follows. This is the moment a quick conversation buys you the most options, from a short grace period to a repayment plan.
The arrears drag on. After several missed payments, the lender may report you to the credit bureaus, request a written repayment plan, and put you on notice that enforcement will follow if nothing changes.
Say your payment is $2,400 on the first of the month, and it does not clear. You are in arrears on the second. Cover that $2,400 within a few days, and most lenders treat it as a one-off. Let it ride for months, though, and you could be staring at $9,600 or more in overdue payments plus fees, with a default notice in the mix.
Common Mistakes and Misunderstandings About Arrears
- Thinking arrears only begin after several missed payments
- Assuming one late payment leaves your credit untouched
- Going quiet on your lender after a missed payment
- Mixing up arrears with foreclosure or a power of sale
- Expecting arrears to pause your other mortgage obligations
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Frequently Asked Questions (FAQ) About Arrears
How many missed payments put a mortgage into arrears?
Just one missed payment is enough to put your mortgage in arrears. The moment a scheduled payment goes fully or partially unpaid past its due date, the mortgage is in arrears.
Do arrears affect my credit score?
Yes. Lenders can report missed payments to the credit bureaus, which can lower your score and make future borrowing harder and costlier.
What is the difference between arrears and default?
Arrears mean you have missed scheduled mortgage payments. Default is a more serious breach of the mortgage contract that usually follows once arrears go unresolved for an extended period, often 90 days or more.
Can I fix mortgage arrears?
Yes, most of the time it’s easy to resolve mortgage arrears by bringing your overdue mortgage payments up to date. Paying the overdue amount, setting up a repayment plan, or simply calling your lender early are the usual routes back to good standing.
Can arrears lead to a power of sale in Canada?
Yes, a mortgage payment in arrears can lead to power of sale in Canada. If mortgage arrears persist and the mortgage falls into default, a lender may pursue a power of sale or foreclosure, depending on provincial law and your contract.