Option 1. Reinstate your mortgage
If you missed some mortgage payments but think you can continue to make them in the future, consider “reinstating” your mortgage. Reinstate means to pay what you owe to get your mortgage back in good standing. You can reinstate your mortgage if the mortgage term hasn’t expired and your lender consents.
When you reinstate your mortgage, you must pay all “arrears” by a certain date. Arrears are money you owe that should have been paid earlier. You also have to pay anything it costs your lender to collect from you, including legal fees.
Discuss with your lender how and when you will catch up on your payments. Your lender may agree to change the terms of the mortgage to help you. If you have a short-term problem, like a temporary layoff, the lender may agree to take smaller payments for a time, and add the shortfall to the total amount of your mortgage.
Under the law in BC, if you have enough money to reinstate but the lender refuses, you can apply for a court-ordered reinstatement.
Try renegotiating the terms of your mortgage with your lender. Most lenders don’t want to own property. They would rather have you stay in your home and keep paying them. They can make a lot of money off the interest you pay on the mortgage. Many lenders will be open to making some sort of deal to get your mortgage back in good standing, instead of starting foreclosure proceedings.
Option 2. Redeem your mortgage
To “redeem” your mortgage is to pay the whole amount of the mortgage off (not just payments that you have fallen behind on).
If the mortgage term has expired, you can redeem your mortgage. Of course, there’s always the question of money. More on that in a moment.
If the mortgage term has not expired, you may be able to redeem your mortgage. It will depend on the prepayment terms of the mortgage. For example, there may be a penalty to pay out the mortgage early.
To redeem your mortgage, you must pay the principal amount owed, interest and legal costs. Depending on the terms of the mortgage, you may also have to pay any property tax arrears.
As well, there may be other charges registered against the property that you will need to pay out. These include other mortgages, liens, or court judgments registered against the property.
In general, there are two ways to get the money to redeem your mortgage:
- get a loan from another lender (this is also called “refinancing”), or
- sell your property.
These options are discussed next.
Option 3. Refinance your mortgage
If you want to redeem your mortgage, you will need money to pay off your whole mortgage. One option is to borrow the money from another lender, giving the new lender a mortgage on the property.
The new mortgage has to be enough to pay the other mortgage plus any arrears and costs that you owe. For example, you will likely be responsible for the first lender’s legal costs.
Where can you find a lender willing to give you a new mortgage to pay off an existing mortgage? A mortgage broker may be able to help you with this. Be cautious of any offers of help you didn’t request.
If you’re concerned about the terms of a new mortgage, have someone else look over the contract. Consider getting independent legal advice. Be cautious if the terms seem too good to be true. Take your time before signing the mortgage documents.
Option 4. Sell your home
If you want to redeem your mortgage, you may decide to sell your home right away to pay the lender. This may be a good option if:
- you can’t reinstate your mortgage
- your home is in good condition and can be sold
- your home is worth at least as much as you need to redeem the mortgage
- you don’t want, or can’t get, a new mortgage
This is also a good option if you have equity in your home. Equity refers to any money that would be left for you after you pay:
- the amount owing on the mortgage, including interest
- any other debts owing on the property (such as any property taxes or any court judgments registered against the property)
Option 5. Do nothing
If you don’t reinstate or redeem your mortgage, your lender can start foreclosure proceedings. Usually, this happens after you’ve missed three months of payments. But it can happen sooner. Learn what’s involved if you’re facing foreclosure.
Be aware that in foreclosure proceedings, the court may order your home to be sold. If you don’t take part in the proceedings, you may get little or no notice that you have to move.
As well, if the money from the sale doesn’t pay all the mortgage debt, your lender will have an enforceable judgment (court order) made against you for the shortfall (the remaining amount of the debt). The lender can try to collect this from you for up to 10 years.