Mortgage Basics #Featured articles
Mortgage Basics #Featured articles
What Happens if You Miss a Mortgage Payment?

Table of contents
Missing a mortgage payment can happen for various reasons, such as a simple mistake, unexpected financial strain, or a cash flow issue. While missing a payment is stressful, it doesn’t automatically lead to losing your home. The longer you delay addressing the missed payment, the more severe the consequences can become.
Whether it’s due to financial hardship or an oversight, you can resolve the situation before it escalates. In Canada, most lenders provide a grace period and are willing to work with borrowers who communicate their financial difficulties early.
However, the consequences if these payments remain unpaid may include late fees, damage to your credit score, and foreclosure. By understanding the steps involved and knowing how to respond, you can minimize the impact of a missed payment on your financial wellbeing.
Key Highlights
- Late fees and additional interest will apply for missed payments.
- A missed or more than 30 days late payment will hurt your credit score.
- Multiple missed payments could lead to foreclosure or power of sale.
What Happens if You Miss a Mortgage Payment?
When you miss a mortgage payment, the consequences increase in severity over time. While your lender won’t take immediate legal action, it’s important to understand how the process unfolds. Any missed payments, including the interest, will be added to your mortgage principal. This means you end up paying more in interest when you miss a payment.
Some lenders offer the option to skip or defer a mortgage payment. This option would allow you to contact your lender if you know you won’t be able to make your next scheduled payment and temporarily pause your mortgage payments. The length of the deferral period and terms vary by lender, with some allowing for the equivalent of 1 monthly mortgage payment as a deferral, while others may offer longer. Typically, most lenders will allow you to defer up to the prepayments made on your mortgage during the year without a reason for the request.
Stage 1: Late Payment Fees (0-15 Days Late)
Some lenders offer a 15-day grace period after your payment due date. If you can pay within this window, you may avoid serious repercussions, but you’ll likely incur a late fee. Depending on the lender, late fees typically range from $25 to $50.
Tip: If you know you’ll miss a payment, contact your lender as early as possible to discuss potential repayment options. Some lenders offer the option of skipping a payment, which may help you avoid late fees.
Stage 2: Credit Score Impact (30 Days Late)
Your missed payment is reported to the credit bureaus after 30 days, which can lead to a drop in your credit score. Payment history accounts for much of your overall credit score, so even one missed mortgage payment can have lasting effects.
Additionally, along with all your payment history, late and missed payments stay on your credit report for up to seven years, potentially affecting your ability to secure loans or better interest rates in the future.
Stage 3: Loan Default (60-90 Days Late)
If you continue to miss payments, your mortgage may enter default after 60-90 days. At this point, your lender may begin legal proceedings, which could eventually lead to foreclosure. It’s crucial to take action before reaching this stage.
Foreclosure and Power of Sale: What Happens Next?
In Canada, the process for reclaiming a home due to non-payment varies by province. Lenders can initiate either foreclosure or power of sale, depending on the province where the subject property is located.
Foreclosure (Judicial Sale)
In British Columbia, Alberta, Quebec, Nova Scotia, Manitoba, Saskatchewan, Yukon, Northwest Territories, and Nunavut, the foreclosure process is a judicial sale, meaning it goes through the courts. This can take several months, offering homeowners more time to resolve their debt or sell the home before losing it.
- Average Duration: Foreclosure may take up to 6 months or longer.
- Court Process: Varies by province.
If you fail to repay the amount owing during the court process, the courts may issue an Order of Foreclosure and begin the sales process. However, before this point, you can file a response to the court order or redeem the mortgage by negotiating a repayment plan with the lender.
Power of Sale
This process is known as power of sale in Ontario, Newfoundland, New Brunswick and Prince Edward Island. It is generally quicker and doesn’t involve the courts.
- Notice Period: Your lender may send you a notice giving you approximately a month, depending on the province, to catch up on missed payments. If you make up the payments, the process stops.
- Sale of the Property: If you don’t resolve the missed payments within the redemption period, the lender can apply to take possession of and sell the property without involving the courts.
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What Is a “Rolling Late”?
A rolling late happens when you miss a payment and resume regular payments without catching up on the missed one. Essentially, you’re always one payment behind. This situation results in late fees, and your credit score will continue to be negatively affected until you fully catch up on the missed payment.
For example, if you miss a monthly mortgage payment and then proceed to make all other regularly scheduled mortgage payments on time, the lender may consider all payments as missed. Each mortgage payment after the missed one would technically apply to the previous month, making each subsequent payment late.
Steps to Take if You Miss a Mortgage Payment
If you think you might miss a mortgage payment, there are steps you can take to mitigate the damage. Your lender should always be informed before you miss a payment so that they can work with you to devise a repayment plan.
Contact Your Lender Immediately
Communication is key. The sooner you contact your lender, the more likely they will be willing to work with you. Most lenders offer payment deferrals or repayment plans to help borrowers experiencing temporary financial difficulties. Lenders are more willing to help develop a repayment plan as they are not in the business of selling homes. Foreclosing on a property is too time-consuming and expensive for lenders. Foreclosures are a last resort if other attempts to resolve missed payments have failed.
Consider a Mortgage Payment Deferral or Skipping a Payment
Some lenders offer payment deferral options or skip-a-payment programs, which allow you to pause payments temporarily. However, keep in mind that deferring payments will increase the overall cost of your mortgage due to accruing interest. Other lenders allow you to take advantage of prepayments you’ve already made in the year by allowing you to skip payments without capitalizing your interest as with a deferral.
Refinance Your Mortgage
If your financial challenges are long-term, refinancing your mortgage may be a viable option. Refinancing can lower your monthly payments by extending the amortization period or securing a lower interest rate. However, a cost-savings benefit analysis is recommended as it allows you to weigh the penalty costs and fees for refinancing your mortgage.
Impact of Missed Mortgage Payments on Your Credit Score
Missing a mortgage payment can have serious consequences for your credit score. In Canada, lenders report missed payments to Equifax and TransUnion, the two major credit bureaus. A missed or late mortgage payment typically doesn’t affect your credit score until it’s 30 days late, but once reported, it can stay on your report for up to seven years.
Factors that Affect the Impact on Your Credit Score:
- Payment history: This will show how frequently you’ve missed payments in the past.
- Length of delinquency: The longer a payment goes unpaid, the more severe the impact.
- Current credit score: Those with higher credit scores may see a more significant drop after one missed payment as missing payments are atypical for them compared to borrowers who may miss payments more frequently.
Frequently Asked Questions
How many missed payments before foreclosure in Canada?
Foreclosure is a lender’s last resort when all other attempts at repayment have failed. Lenders send multiple notices before initiating foreclosure or power of sale, giving you time to catch up on missed payments. You would need to miss multiple mortgage payments and fail to connect with your lender to make a repayment plan before they initiate the foreclosure or power of sale process.
Will one missed mortgage payment ruin my credit score?
A single missed payment can lower your credit score, especially if it’s late 30 days or longer. The missed payment will stay on your credit report for up to seven years but will have less impact if you continue making on-time payments.
Can I switch lenders if I’ve missed a mortgage payment?
Switching lenders may be more difficult if you’ve missed a payment, as lenders review your payment history during the application process. However, it’s not impossible, especially if you catch up on the missed payments and improve your credit score.
Is there a grace period before my mortgage payment is missed?
Most Canadian lenders offer a 15-day grace period before considering a mortgage payment officially missed. During this time, you can make payments and catch up without being reported to the credit bureaus.
Can I lose my home after just one missed mortgage payment?
Losing your home after a single missed payment is highly unlikely. Lenders typically only pursue foreclosure or power of sale after several months of non-payment. Communicating with your lender early on can help prevent the situation from escalating.
Final Thoughts
Missing a mortgage payment is never ideal, but it doesn’t have to spell disaster. With open communication and proactive measures, you can resolve the issue before it significantly impacts your credit or puts your home at risk. If you anticipate missing a payment, contact your lender immediately to discuss potential solutions like deferral, skip-a-payment, payment plans, or refinancing. If you see your finances underwater and can’t mitigate a foreclosure, seek professional legal and mortgage advice to stay in control of the outcome.
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