Behind on Mortgage Payments in BC? Your Options Before Foreclosure

Missing a mortgage payment, or seeing one coming, is stressful. The good news is that you usually have more choices than people expect, and the earlier you act, the more of them tend to be open to you.

This article walks through the steps to take with your lender, what relief may be available, and the protections that exist if a lender goes to court in British Columbia. It explains how things generally work. Your own mortgage contract and circumstances matter, so a lawyer can confirm what applies to you.

This article covers the law of British Columbia.

Start by contacting your lender

The Financial Consumer Agency of Canada (FCAC) advises that if you cannot make your payments, you should contact your lender as soon as possible. Waiting until arrears pile up generally narrows what a lender is willing to discuss.

Some lenders will reach out to you 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, so do not count on a call from them.

Relief options lenders may offer

FCAC lists several measures a lender may consider if you are struggling. Which ones are offered is up to the lender and your situation.

• Payment deferral, usually up to 4 months.
• Extending the amortization, which lowers each payment by spreading the debt over more years.
• Capitalizing arrears, meaning the missed amounts are added to the mortgage balance.
• Interest-only periods.
• Special payment arrangements.
• Blend-and-extend, which combines your current rate with a newer one and lengthens the term.
• A sale-by-borrower plan, usually 90 days or less, giving you time to sell the home yourself.

The cost of relief

Relief is not free. Unpaid interest is generally added to the balance, and interest then accrues on that larger amount. Relief measures may therefore increase the total cost of the mortgage over its life.

Before you agree to anything, ask for the new terms in writing and ask how much more you will pay over time. A lawyer or accountant can help you compare options if the numbers are unclear.

Protections if the lender goes to court

In British Columbia, a foreclosure or redemption proceeding must be started by petition in the Supreme Court under Rule 21-7 of the Supreme Court Civil Rules. The petition must include the informational notice in Form 125, and people whose interest would be extinguished must be made respondents. As a respondent, you may file a response to the petition.

The court has wide powers. It may set a redemption period, take an account of the amount owing and daily interest, decide priorities, order a sale and grant further relief. If a respondent does not pay within the court-ordered period, the petitioner may apply for a final order of foreclosure. The length of the redemption period is set by the court, so it depends on the case.

• Interest Act s. 8: 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.
• Law and Equity Act s. 25: where a default makes payment due earlier than otherwise, the court in a proceeding to enforce a mortgage of land may relieve any person from the consequence of the default, despite a contrary agreement.
• Law and Equity Act s. 24: the court may relieve against penalties and forfeitures and attach conditions.
• Law and Equity Act s. 15: the court may, on application of a person with an interest, direct a sale on terms it considers just, as an alternative to foreclosing the right of redemption.

A party of record may also apply at any time for an order that the property be sold rather than foreclosed. Whether any of these protections helps you depends on the facts, and the court decides.

Paying the amount due and costs

If you pay the amount due, Rule 21-7 allows you to serve a notice to assess costs. If the petitioner does not file a bill of costs within 14 days, the petitioner loses entitlement to costs.

Court attendance rules also matter. Practice Direction PD-66 requires in-person attendance for foreclosure proceedings in regular chambers, though some Rule 21-7 applications other than approval of sale may be in virtual chambers. Check the current practice direction or ask a lawyer how your matter will be heard.

What to do next

• Call your lender now and ask what relief it offers.
• Gather your mortgage contract, recent statements and any letters from the lender.
• Write down your income, expenses and what you can realistically pay.
• Ask for any relief terms in writing, including the effect on total cost.
• If you receive court documents, note the dates and do not ignore them, since you may be able to file a response.
• Speak with a lawyer about your options, including a sale, before a court process advances.

Frequently asked questions