Oh no, you’ve missed your mortgage payment! After the initial panic fades away, you might be wondering what happens when you miss a mortgage payment. 

A late mortgage payment in Canada might not be catastrophic, mind you, but it’ll still have a negative impact if you aren’t careful and keep track of your payments. 

Missing a mortgage payment is no laughing matter and you should take steps to rectify the situation as soon as possible to avoid any serious consequences.

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Key Highlights

• Missing a mortgage payment is a serious situation that could have some serious consequences if you don’t catch up on your payments in a reasonable time. 
• Among these consequences could be payment of late fees, a worse credit score, and even losing your home. 
• Remember, the lenders don’t want to foreclose on your home and ruin your credit score so you have plenty of options if you’re going to miss a mortgage payment. 

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What Happens When You Miss a Mortgage Payment?

If you miss a mortgage payment in Canada, the lender has the right to take action to recover the amount owed. This may include late fees and interest charges, as well as the potential for foreclosure.

It’s important to understand that a missed mortgage payment is a serious issue. It can have long-term consequences for your credit score and ability to borrow money in the future.

It’s always best to try to make your mortgage payments on time, but if you do find yourself in a situation where you can’t make a payment, it’s important to contact your lender as soon as possible.

1. You’ll pay late fees

The mortgage contract that you signed when you took out your mortgage loan outlines the specific terms and fees that apply if you make a late payment on your mortgage. These fees are often called late fees or penalty fees. 

The amount of the late fee can vary, but it is typically between $25 and $50. You may be charged a late fee as soon as your payment is past due, so it is important to make sure you make your mortgage payments on time to avoid incurring these fees.

2. Your credit score could go down

If you miss a payment on your mortgage, this will be reported to the credit bureau after 30 days. Your credit score is a measure of your creditworthiness, and it is used by lenders to determine whether to approve you for credit and what interest rate to charge you. Your credit score is calculated using information from your credit report, which is a record of your credit history. 

The longer your payment is overdue, the more damaging it will be to your credit score. Even if you eventually catch up on your missed payment, a late payment will remain on your credit report for years. This can continue to affect your credit score and your ability to get approved for credit during that time.

3. You could lose your house

The lender can take back your home and sell it if you fail to make your mortgage payments as agreed in the mortgage contract. This is known as foreclosure. 

The process of foreclosure varies by province in Canada. In British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, and Nova Scotia, it is known as judicial sale or judicial foreclosure. This is a lengthy process that involves going through the court system, and it can take up to six months. At the end of the process, the title of the house is transferred to the lender, who keeps the proceeds from the sale. 

In Newfoundland, New Brunswick, Prince Edward Island, and Ontario, the process is known as power of sale. This process begins with the lender sending you a notice that gives you 35 days to catch up on your missed payments. 

If you are able to get back on track, the process stops, but you will still be responsible for any associated fees and your credit score will be affected. If you do not catch up on your payments within the 35-day period, the lender can begin the process of transferring ownership of the property through power of sale. 

4. You might go into default 

If you miss a payment, your mortgage will become delinquent, which means that you are behind on your payments. If you continue to miss payments and do not catch up on your delinquent balance, your mortgage will go into default after 30 days. 

This is a serious situation that can have significant consequences. When a mortgage goes into default, it means that you have failed to fulfill your obligations under the mortgage contract. This can result in negative effects on your credit score and may lead to foreclosure.

How many late payments you can make before it’s a “missed” payment

It’s important to note that a late mortgage payment, even if it’s just one day past the due date, can have negative consequences. Late payments are reported to credit bureaus, which can damage your credit score. Additionally, the lender may charge a late fee, which can add to the amount you owe.

In Canada, most lenders will give you a 15-day grace period before your mortgage payment is considered to be missed. This means that your payment is not considered late until it is 15 days overdue. During this grace period, you typically will not be charged late fees. However, if you do not make your payment by 30 days after the due date, the lender will report the missed payment to the credit bureaus.

How many late payments you can make before a foreclosure

There is no set number of missed mortgage payments before foreclosure in Canada. The lender will typically work with the borrower to find a solution, such as restructuring the loan or coming up with a repayment plan. However, if the borrower is unable to come to an agreement with the lender, the lender may begin the foreclosure process.

You’ll typically get notice of a late payment after 30, 60, and 90 days. It’s recommended to take action even before you get the first notice. 

What to do if you think you might miss a payment

If you’re struggling to make your mortgage payments, options are available to help you avoid missing payments and potentially facing foreclosure. The more proactive you are ahead of time, the better you’ll work through this awful situation. 

These may include refinancing your mortgage to reduce your monthly payments, or working with a credit counsellor to develop a budget and plan to get your finances back on track.

What to do if you’ve already missed a payment

If you’ve already missed a payment, don’t worry, there are still plenty of options at your disposal. Just make sure to pay your missed payment before the next one comes up. 

1. Contact your lender and discuss your options

If you think you might miss a future mortgage payment, it is important to contact your lender right away. Some lenders may offer a skip-a-payment option, which allows you to miss or defer one or more payments without being charged a late fee. 

2. Keep in mind repayment options are available

Some lenders may have a hardship program that can help you get back on track with your mortgage payments. These programs can provide temporary relief by allowing you to make reduced or deferred payments for a certain period of time. 

If you are struggling to make your mortgage payments, it is worth contacting your lender to see if they have any options that can help you avoid missing a payment.

3. Stop a “rolling late” situation

If you miss a mortgage payment and then make your payment the following month, you have not caught up on your missed payment. The next payment will be considered a late installment of the originally missed payment.

This can put you in a “rolling late” situation, where every subsequent payment is considered late and you will be charged late fees every month. 

It’s important to understand the difference between missing a payment and skipping a payment, and to take action to catch up on any missed payments to avoid these consequences.

4. Consider mortgage refinancing

There are many reasons why you might choose to refinance your mortgage, such as consolidating debts, accessing the equity in your property, or lowering your monthly payment. 

When you refinance your mortgage, you may be able to avoid prepayment charges, which are fees that are sometimes charged when you pay off your mortgage loan before the end of the term. If you refinance your mortgage at the end of your current term, you may be able to avoid these charges and save money. 

Final Thoughts

It’s important to always try to make your mortgage payments on time. If you miss a payment, you must contact your lender as soon as possible to discuss your options and avoid potential negative consequences. If you miss one or two mortgage payments, this may not have significant consequences. However, if you start to miss more payments and it looks like you may be heading toward foreclosure or bankruptcy, it may be a good idea to consider selling your home. 

Having too many missed payments on your credit report can hurt your credit score, but a foreclosure or bankruptcy can have even more severe long-term consequences for your credit. It’s not the best solution, but even if it means having to sell your home, it is important to avoid a foreclosure or bankruptcy. 

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