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Missing mortgage payments or being unable to finish paying off your mortgage all together is obviously the last thing you want to happen, but the reality of life is sometimes financial issues pop up and dealing with them can be very difficult.

We can’t stress enough that if you find yourself in a situation where you can’t afford to make your mortgage payments, do not under any circumstance ignore the issue. Banks are often less willing to renegotiate your mortgage if you ignore them. Instead, do the following:

  • Contact your mortgage lender right away; even if you’re not 100% sure you won’t be able to make your payment.
  • Be as honest and open with your lender as possible, tell then what’s going on so they can figure out a plan to help you.
  • If you’re given another chance, work as hard as possible to take full advantage of that second chance.
  • Cooperate with everyone and anyone that you deal with.

No matter what the reason is, if you can’t make your mortgage payments, you should prepare yourself to hear the word foreclosure. While most lenders don’t typically want to go through the process of foreclosing on your home, if you don’t make your mortgage payments it is their legal right to do so and they will.

Instead of waiting around for the inevitable to happen, you should take responsibility, get informed and learn about the process of foreclosure. Once you understand the procedure as a whole you may be able to figure out either, how to avoid it or at least make the process smoother for everyone involved.

5 Mortgage Mistakes to Avoid, click here.

What is Foreclosure?

Foreclosure is a legal proceeding taken against a mortgage borrower who stops making payments on their loan. Since the house that is purchased with a mortgage acts as collateral for the mortgage loan, it can be repossessed and sold by the lender should the borrower stop making payments. Since a foreclosure is a legal proceeding, the lender must first get the approval of a court to repossess a house. Once the house is repossessed it is typically sold so that the lender can get back the money it’s owed.

The Process

Foreclosure is a serious issues and it could happen if you don’t make your mortgage payments on time, but it’s important to understand that the foreclosure process will not happen right away. Here’s what you can expect once you stop making your mortgage payments:

  • You will not automatically lose your home for missing one payment.
  • Expect to hear from your lender right away, they will want to help you figure out how to continue to make your payments.
  • Foreclosure is a prolonged and expensive process; therefore your lender probably won’t suggest it right away.
  • You will start to receive letters from your lender demanding that you make your payments; these letters typically come after 30 days, 60 days and 90 days.
  • Once you hit 90 days of being unable to make your mortgage payments you’ll be in arrears.
  • If you do not get in contact with your mortgage lender you should now expect them to start the foreclosure process.

In Canada, the foreclosure process varies from province to province. So it’s important that you take the initiative to be informed as possible about how foreclosures are performed in the province you live in.

Generally speaking there are two main ways that lenders in Canada are able to recover their money, you should expect to go through one of the following procedures.

Judicial Sale

Judicial Sale or Judicial Foreclosure is heavily involved in the legal system; the foreclosure is performed under the direction of the Canadian court system. The process is typically slow and can take up to 6 months. Once the Certificate of Foreclosure is given to the lender, the ownership of the house automatically transfers to the lender. This means that when the house is sold, the lender will receive all capital.

Judicial Sale or Judicial Foreclosure is used in the following province:

  • British Columbia
  • Alberta
  • Saskatchewan
  • Manitoba
  • Quebec
  • Nova Scotia

Power of Sale

This process starts when the lender sends the borrower a notice and provides them with a 35 day redemption period. Within these 35 days the borrower can start making their payments again and get back on track. If a borrower is able to do this, the Power of Sale will not continue but they will have to cover certain charges associated with the Power of Sale.

A Power of Sale allows the lender to sell the house they are foreclosing on without the involvement of the court. This process is significantly faster than Judicial Foreclosure.

Power of Sale is used in the following province:

  • Newfoundland
  • New Brunswick
  • Prince Edward Island
  • Ontario

Looking for even more information about foreclosure in Canada? Read this article.

Dealing with a looming foreclosure it not easy but if prepare yourself, get in contact with your mortgage lender and are as cooperative as possible you can and will make it through the process.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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