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If You're Having Difficulty Paying Your Mortgage - Understand your legal rights

Understand your legal rights

If you default on your mortgage

A mortgage is a loan used to buy a home or other property. Under the law in BC, a mortgage gives the lender a “charge”—meaning an interest or a right—against the property being purchased. That charge gives the lender rights if the borrower “defaults” on the mortgage. 

The most common way for a borrower to default is by not making payments under the mortgage as promised. Most mortgages also say that it is a default if you:

  • don’t pay the property taxes
  • add a second mortgage without the lender’s permission
  • abandon the property
  • declare bankruptcy

If you default on your mortgage, the lender has the right to “accelerate” (speed up) the mortgage. This allows the lender to claim the full balance owed under the mortgage, plus interest and other costs, even though the mortgage term hasn’t yet expired. 

The lender can then start legal proceedings to take the property or sell it to pay the mortgage debt. This legal process is called foreclosure. (Learn what’s involved in foreclosure proceedings.)

You don’t automatically lose your home if you default

“I was having trouble managing my debt, and I missed a couple payments on my mortgage. I got a demand letter from the lender. I responded, and said I’d like to get my mortgage back in good standing. I asked if I could have until the end of the month to pay what I owed. The lender agreed. Now, I’m up to date on my payments and I get to keep my home.”

– Shaun, Surrey

When you default on your mortgage, you don’t automatically lose your home. 

If you miss a mortgage payment, the lender will usually send a reminder letter. If they don’t hear from you or receive the missed payment, the lender will then follow up with a demand letter. The letter will demand you pay the amount owing under the mortgage by a certain date, or the lender will sue you.

Under the law, the lender must send you a demand letter before they can start legal proceedings to take your home.

The lender’s demand letter will set out your options

The demand letter must say exactly what you owe under the mortgage. It must also say that:

  • you have to pay a certain amount by a certain date to catch up on what you owe to “reinstate” your mortgage (restore it to good standing), or
  • you have to pay the whole amount you borrowed (not just what you owe) plus interest and expenses to “redeem” your mortgage (pay it off). 

If you don’t do one of these things, your lender can start legal proceedings to take your home. Learn what’s involved in foreclosure proceedings.

If you receive a demand letter, don’t ignore it. If you do, the legal proceedings will proceed without you, and you won’t get any say. As well, you will get little notice if your home is sold, or if the lender tells you that you have to move.