Skip to main content Skip to chat

You missed a mortgage payment. Now what?

December 18, 2019

Written by Romana King

Key takeaways

  • While one missed mortgage payment is not catastrophic, it does have consequences.
  • If you miss a payment, speak to your lender immediately to figure out next steps.
  • Make sure you have automatic withdrawals set up, so you don’t forget to make a regular mortgage payment. 

You missed a mortgage payment. Now what?

There's a lot of fear around missing a mortgage payment. In Canada, missing a month's mortgage payment may not be as catastrophic as you'd think, although it does have implications.

Missed payment policies of each lender may vary, but here's what can happen.

What happens when you miss a mortgage payment?

While one missed mortgage payment is not catastrophic, it does have consequences.

Quite often, if you miss a mortgage payment, your bank or mortgage lender will either call or send a letter by regular post. This initial contact serves as a reminder that you're contractually obligated to pay back the loan and helps to notify you that your last payment was not processed.

Don't ignore this call or letter.

This is when you'll need to speak to your lender. They may temporarily hold your automatic withdrawal, or may want to do a catch-up payment from the bank account currently on file. The lender may simply try to take the payment again later, or may plan to take a "double payment" for your next payment.

However, if you ignore the situation, the impact can snowball quickly into a big problem. You'll probably start to see registered letters in the mail with escalating warnings about foreclosure.

Keep in mind that some lenders will add a fee for late payments, and this would typically be stated in your mortgage contract.

What happens after multiple missed payments?

The initial response from your lender will be to report you to the credit reporting agencies (TransUnion and Equifax) that track individual credit scores. This flag against you might cause your credit score to drop. Depending on how low the score drops, you could face a tougher time getting a loan or unable to get the lowest mortgage interest rate, forcing you to pay more for the loan.

The lender won't stop at reporting your payment delinquency. Collection teams would probably get involved, and the lender may proceed to the legal process of foreclosing on the home if there's no resolution.

If that happens, a judge will hear arguments that you breached the mortgage contract. The lender will argue that because of the breach (and your subsequent refusal to take action to rectify the breach), the lender should be allowed to take possession of the underlying asset — your home — to sell and recoup their losses. This is known as a foreclosure (or power of sale depending on the province).

What to do if you miss a mortgage payment

1. Contact your lender immediately

If you suspect you may miss a future payment, contact your lender immediately.

Some lenders can offer a skip-a-payment option — where you can miss or defer one or more payments without penalty. Other lenders may have a "hardship" program that can help clients get back on their feet.

2. Address potential future problems

If it appears you may end up unable to pay your mortgage consistently within the next little while — say due to job loss or other financial hardship — contact your lender immediately. Most lenders — and even the mortgage default insurance firms, such as Canada Mortgage and Housing Corporation, Genworth and Canada Guaranty — offer initiatives to help homeowners who may be temporarily struggling to make mortgage payments.

3. Set it and forget it

Sometimes, missed mortgage payments are not due to financial problems, but simply because a homeowner was on vacation and forgot to make the payment. Avoid this by setting up a chequing account with automatic payments made every month to your lender. Be careful if you have a variable rate mortgage where the payment amount may fluctuate and be prepared for changes to your automatic payment.

Final thoughts

There's no need to panic if you miss a mortgage payment. By being proactive, communicating with your lender and putting a process in place that makes paying your mortgage easy and automatic, you can avoid knocks against your credit score and the misery of debt collectors, potential bankruptcy and foreclosure.

Also, if you're in a situation where you can no longer afford your payments, consider selling and downsizing for now until you get back on your feet.

This article or video (the “Content”), as applicable, is provided by independent third parties that are not affiliated with Tangerine Bank or any of its affiliates. Tangerine Bank and its affiliates neither endorse or approve nor are liable for any third party Content, or investment or financial loss arising from any use of such Content.

The Content is provided for general information and educational purposes only, is not intended to be relied upon as, or provide, personal financial, tax or investment advice and does not take into account the specific objectives, personal, financial, legal or tax situation, or particular circumstances and needs of any specific person. No information contained in the Content constitutes, or should be construed as, a recommendation, offer or solicitation by Tangerine to buy, hold or sell any security, financial product or instrument discussed therein or to follow any particular investment or financial strategy. In making your financial and investment decisions, you will consult with and rely upon your own advisors and will seek your own professional advice regarding the appropriateness of implementing strategies before taking action. Any information, data, opinions, views, advice, recommendations or other content provided by any third party are solely those of such third party and not of Tangerine Bank or its affiliates, and Tangerine Bank and its affiliates accept no liability in respect thereof and do not guarantee the accuracy or reliability of any information in the third party Content. Any information contained in the Content, including information related to interest rates, market conditions, tax rules, and other investment factors, is subject to change without notice, and neither Tangerine Bank nor its affiliates are responsible for updating this information.

Tangerine Investment Funds are managed by 1832 Asset Management L.P. and are only available by opening an Investment Fund Account with Tangerine Investment Funds Limited. These firms are wholly owned subsidiaries of The Bank of Nova Scotia. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.