- Contact your lender as soon as you know you cannot make payments, because FCAC lists several relief options, such as payment deferral and extended amortization.
- Relief usually has a cost: unpaid interest is generally added to your balance and interest then accrues on it.
- If a lender does go to court, the BC Supreme Court can relieve a person from the consequences of a default that made payment due earlier.
Missing a mortgage payment, or seeing one coming, is stressful. The good news is that lenders often have ways to adjust your payments, and these are usually easier to arrange before you fall far behind than after.
This article walks through the relief options to ask about, what they can cost you over time, and which protections apply in British Columbia. It is general information, not advice on your own mortgage, so a lawyer can confirm how it applies to you.
This article covers the law of British Columbia.
Start with your lender, and do it early
The Financial Consumer Agency of Canada (FCAC) says that if you cannot make your payments, you should contact your lender as soon as possible. Which options are open to you depends on your lender and your situation, and a lawyer can help you understand them.
Some lenders will reach out first. FCAC's Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances expects federally regulated lenders to proactively contact borrowers at risk and discuss relief for principal residences. That guideline does not bind non-federally regulated lenders such as private lenders. If you have a private lender, it is worth contacting them directly to ask what relief they can offer.
Relief options to ask about
FCAC lists several kinds of mortgage relief. Which ones you can get depends on your lender and your situation, so treat this as a list of questions to ask, not a list of rights.
| Option | What it generally means |
|---|---|
| Payment deferral | Payments are paused, usually for up to 4 months |
| Extended amortization | Payments are spread over a longer period |
| Capitalizing arrears | Missed amounts are added to the mortgage balance |
| Interest-only period | You pay only interest for a time |
| Special payment arrangement | A tailored plan to catch up |
| Blend-and-extend | A new arrangement that blends your rate and extends the term |
| Sale-by-borrower plan | Time to sell the home yourself, usually 90 days or less |
A sale-by-borrower plan is one option to ask about if keeping the home is no longer realistic; FCAC says it is usually 90 days or less. Ask your lender exactly what it will agree to in writing.
The trade-off: relief can cost more over time
Relief usually does not make the debt disappear. Unpaid interest is generally added to the balance, and interest then accrues on that larger amount. FCAC also notes that relief measures may increase the total cost over the life of the mortgage.
Before you accept any option, it helps to ask these questions:
- How much will be added to my balance?
- Will my interest rate or payment change afterward?
- How long does the relief last, and what happens when it ends?
- Are there any fees, and will the terms be confirmed in writing?
- Does this change my renewal date or the length of my term?
Limits on penalty interest for arrears
Section 8 of the federal Interest Act says a mortgage cannot impose a fine, penalty or rate of interest that increases the charge on arrears beyond the rate payable on principal not in arrears. In plain terms, a lender generally cannot charge a higher interest rate just because you are behind. If your statement shows a higher rate or an unusual penalty on arrears, ask the lender to explain it, and consider having a lawyer review it.
If the lender goes to court, and what to do next
Sometimes a missed payment makes the whole amount payable earlier under the mortgage terms. In a proceeding to enforce a mortgage of land, Law and Equity Act s. 25 allows the court to relieve any person from the consequences of that kind of default, despite any contrary agreement. The court may also relieve against penalties and forfeitures and attach conditions. Whether that helps depends on the facts, so this is a point to raise with a lawyer promptly if you receive court papers.
Practical steps for now:
- Call your lender before the next missed payment, if you can.
- Gather your mortgage statements, income details and a simple monthly budget.
- Ask for every offer in writing and read what it does to your balance.
- Find out whether your lender is federally regulated or private.
- Get legal advice quickly if you receive a demand letter or court documents.
Frequently asked questions
Will my lender automatically offer help if I fall behind?
Not necessarily. FCAC's guideline expects federally regulated lenders to proactively contact at-risk borrowers and discuss relief for principal residences, but it does not bind private lenders. The safest approach is to contact your lender yourself as soon as possible.
How long can I defer mortgage payments?
FCAC says payment deferral is usually up to 4 months. The actual terms are set by your lender, so ask what applies to you.
Does a payment deferral mean I owe less?
No. Unpaid interest is generally added to your balance and interest then accrues on it, so relief may increase the total cost of the mortgage.
Can a lender charge a higher rate because I am in arrears?
Under Interest Act s. 8, a mortgage cannot impose a fine, penalty or interest rate that increases the charge on arrears beyond the rate payable on principal not in arrears. If you think this has happened, a lawyer can review your mortgage.
Sources
- Law and Equity Act — bclaws.gov.bc.ca
- Interest Act (Canada) — Justice Laws (federal)
- FCAC – Mortgage relief options — canada.ca
- FCAC – Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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