What Happens if I Miss a Mortgage Payment?

Life happens to all of us. We get busy, don’t have extra cash on hand or simply forget to make our mortgage payments some months. However, this seemingly simple act of missing a payment can have a profound impact on your credit history. It can quickly ruin your score - and the more payments you miss, the more it damages your overall credit history.

And it isn’t just credit you need to worry about. You may be forced into situations like foreclosure or power of sale. Banks and other financial institutions may turn you down for extending lines of credit. If you’re interested in finding out the consequences of missing a mortgage payment, keep reading.

What are mortgage arrears?

Arrears are when you’re behind on meeting your financial obligations or debts. Mortgage arrears refers to being late on making monthly mortgage payments. Remember, your home is more than just shelter. When you get into mortgage arrears, your ownership of your property can be potentially affected.

When does your mortgage go into arrears, you may be wondering. It takes three to four months of missed payments to go into arrears. However, it does depend on the lender or bank you’re working with. It can be measured by the frequency of prices too. For example, if you’re making weekly payments, it will take two to three missed payments to go into arrears. Be sure to check with your lender on your clauses so you can make payments in time to avoid arrears.

How do missed mortgage payments affect credit score?

One of the most significant consequences of a missed mortgage payment is a poor credit score. Mortgage lenders will report your payments to Equifax or TransUnion, the main credit bureaus in Canada. This holds for ‘positive payments’  i.e. when you make the payment on time and in full. Even one missed payment will appear on your comprehensive report. 

Mortgage payments are coded as an ‘M,’ with the numbers corresponding. An M1 means that you’re making your payment on time and that the amount is up to date. M2 means you’re 31-59 days late, while M3 means you're 60-89 days late. Essentially, the higher up you go, the more challenging it will be for you to get loans and other lines of credit quickly. 

What are some other downsides to missing a payment?

A mortgage is a legally binding contract. So not adhering to its terms is considered a breach of contract. When your mortgage goes into arrears, your lender is at liberty to carry out various actions. This can include:

• Suing the borrower because they have failed to make the due payments

• Taking possession of the property

• Foreclosing the property

• Selling the property (power of sale)

Your lender will notify you of your options if you end up missing a payment. This gives you time to make the payment, if possible.

How many mortgage payments can I miss?

Technically, none. Lenders can bring legal proceedings after 15 days of non-payment have passed. However, lenders prefer to communicate from the get-go and help find a solution rather than proceeding with confrontation. Ask your lender if they can offer you a repayment plan or if you can have a little more time to take out mortgage arrears loans. There is typically no grace period, and lenders do take missed payments very seriously. 

When you’re 90 days behind on payments is when most lenders will start legal proceedings. They usually do this through foreclosure or power of sale.

What can I do?

Missing a payment can happen to all of us. It is what you do after a missed payment that matters. Try to take speedy action. One of the best courses of action is to take a mortgage arrears loan to help consolidate your payment. This will help if you’re got a power of sale or foreclosure notice or if your bank won’t renew your mortgage term because of missed payments. It will also help with the resolution of late payments.

In addition, those who miss a couple of payments often see a snowballing effect, where the costs (along with other bills) start piling up. Using professional help to solve your financial problems will be critical as you could end up losing your home and access to other lines of credit due to your poor credit history. So taking out a mortgage arrears loan will help you keep your head up and tackle all your payments to prevent the snowballing effect.

Mortgage relief isn’t a decision to be taken lightly. Make sure you speak to a reputed and trusted mortgage lender who will work on personalized plans to resolve your problems for you.

Missing a mortgage payment and the ensuing credit trouble can be daunting and scary. However, we believe that you shouldn’t live your life weighed down by anxiety about your finances. 

If you have current mortgages or taxes in arrears, Canadalend.com experts can help provide relief from your financial burdens. Whether you decide to take out a second mortgage or a home equity loan, mortgage arrears loans are the best way to resolve your mortgage payments quickly.

We offer personalized loans to help fix your late payment problems. The licensed independent mortgage agents at Canadalend.com will walk you through the options to get back on track with the right financial solutions.

For more information on mortgage arrears loans, call Canadalend at 1-866-422-6536 or contact us here.