Behind on Your Mortgage Payments in BC? Options Before Foreclosure

Missing a mortgage payment, or seeing one coming, is stressful. The good news is that lenders often have ways to adjust a mortgage before things reach a court. The earlier you raise the problem, the more choices there tend to be.

This guide explains the relief options Canada's Financial Consumer Agency (FCAC) describes, what they can cost you over time, and two legal protections that matter in British Columbia. It also briefly explains what happens if the problem is not resolved. It is general information, not advice on your own mortgage.

This article covers the law of British Columbia.

Contact your lender first

FCAC's advice is simple: if you cannot make your payments, contact your lender as soon as possible. Waiting usually narrows your options rather than widening them.

Some lenders will reach out to you. FCAC's guideline for existing consumer mortgage loans in exceptional circumstances expects federally regulated lenders to contact borrowers who are at risk and discuss relief for principal residences. That guideline does not bind non-federally regulated lenders, such as private lenders. If your mortgage is with a private lender, do not wait for a call; start the conversation yourself.

Relief options lenders may offer

FCAC lists a range of measures a lender may be able to use. Which ones are available depends on your lender and your situation.

• Payment deferral, usually up to 4 months.
• Extending the amortization, which spreads the debt over a longer period.
• Capitalizing arrears, meaning the missed amounts are added to the mortgage balance.
• An interest-only period.
• A special payment arrangement.
• Blend-and-extend, another option FCAC lists; ask your lender how it would work for your mortgage.
• A sale-by-borrower plan, usually 90 days or less, which gives you time to sell the home yourself.

Ask the lender to put any agreement in writing, and read it before you sign so you know exactly what changes and for how long.

Understand what relief can cost

Relief can make the next few months manageable, but it is not free. Unpaid interest is generally added to your balance, and interest then accrues on that larger amount. Relief measures may therefore increase the total cost of the mortgage over its life.

That does not make relief a bad idea. It means you should ask the lender to show you the new balance, payment, and end date before you agree. A lawyer or accountant can help you compare options if the numbers are not clear.

Two legal protections to know about

Federal law limits what a lender can charge when you are behind. Under section 8 of the Interest Act, a mortgage cannot impose a fine, penalty, or rate of interest that increases the charge on arrears beyond the rate payable on principal that is not in arrears.

BC law also gives the court some room to step in. Under section 25 of the Law and Equity Act, where a default makes a payment due earlier than it otherwise would be, the court, in a proceeding to enforce a mortgage of land, may relieve any person from the consequence of the default, even if the agreement says otherwise. Section 24 lets the court relieve against penalties and forfeitures and attach conditions.

These are not automatic. Whether a court would grant relief depends on the facts, so get legal advice if a lender demands the full balance or adds charges you do not understand.

If it is not resolved, and what to do now

If the problem is not worked out, a foreclosure or redemption proceeding in BC must be started by petition in the Supreme Court under Rule 21-7 of the Supreme Court Civil Rules. People whose interest could be extinguished must be named as respondents and may file a response to the petition. The court can set a redemption period, take an account of the amount owing, and order a sale among other things. How long this takes depends on the case, so do not assume a fixed timeline.

• Call your lender now and ask what relief options apply to your mortgage.
• Find out whether your lender is federally regulated or private.
• Gather your mortgage statements, income details, and a list of your monthly expenses.
• Ask for any relief offer in writing, with the new balance, payment, and term.
• Compare the total cost of each option, not just the lower payment.
• Keep every letter or court document you receive, and do not ignore them.
• Speak with a lawyer if you receive a demand letter or court papers.

Frequently asked questions