What Happens If I Miss Mortgage Payments in Newfoundland and Labrador?

Falling behind on your mortgage is stressful, and it is easy to imagine the worst. In practice there are steps a lender has to follow, and there are options you can look at before things reach a court.

This article explains what a missed payment means, how a lender's notice and power of sale work under the Conveyancing Act, how fees on arrears are limited, and what you can do now. It is general information, so talk to a lawyer about your own mortgage.

This article covers the law of Newfoundland and Labrador.

What a missed payment means

Missing a regular payment breaches the mortgage terms. The lender can legally recover the amount owed, which may lead to a forced sale of the home. That does not mean it happens right away, but it is why acting early matters.

Borrowers are urged to contact the lender early, and lenders may offer relief such as waived fees, extended amortization or no interest on interest. Where a missed payment is agreed as part of a relief measure, it should not be reported to credit bureaus under the guideline for banks, and relief requires your express consent. In severe difficulty, selling the home is an option.

How power of sale works

Power of sale under the Conveyancing Act applies where the mortgage is made by deed. A mortgagee cannot use it unless written notice is first given, and the default must continue 30 days after notice. The notice must go to the mortgagor and other registered encumbrancers or guarantors.

Notice must be in writing and may be served by leaving it at the last known residence or business in the province, attaching it to the mortgaged land, or registered mail. Notice of sale cannot be published until the 30 days have passed and must run in a local newspaper for two consecutive weeks.

Protections you have

• Before a power-of-sale sale, the mortgagee must obtain a written appraisal by a qualified appraiser.
• A sale for less than 75% of appraised value needs a judge's approval.
• The mortgagee must account to the mortgagor and others within 30 days, and you may apply to a judge for relief.
• If the mortgagee does not comply with ss. 6 to 11, the mortgagor and other registered encumbrancers or guarantors are not liable for any sale deficiency.
• Those protections apply despite any contrary term in the mortgage deed.

Foreclosure, redemption and fees

Power of sale does not affect the right of foreclosure. In an action for foreclosure, redemption or sale, the court may direct a sale of the mortgaged property on terms it thinks appropriate. On a default application, the plaintiff must produce a solicitor's certificate of registered encumbrances, prove service and non-filing of a defence by affidavit, and give a payment statement. The court may order notice to other encumbrancers, direct a sale, and set a time within which any party entitled to redeem may do so. The time allowed is set by the court order, so it depends on your case.

A mortgagor entitled to redeem may pay principal, interest and costs to satisfy the mortgage. You may also require assignment to a third party for a fee of up to $50, though this is not available if the mortgagee is in possession, and you may inspect and copy title documents and appraisal reports the mortgagee holds, at your own cost.

On fees, the federal Interest Act says no fine, penalty or rate of interest may be charged on arrears of principal under a mortgage on real property that increases the charge on arrears above the rate payable on principal not in arrears. Other default fees are set by your contract, so read your mortgage.

What to do next

• Contact your lender as soon as you expect a missed payment and ask about relief options.
• Keep any notice you receive and note the date and how it was delivered.
• Gather your mortgage documents, payment records and any letters from the lender.
• Ask a lawyer to review the notice, the mortgage terms and whether the steps required by the Conveyancing Act were followed.
• If you have a mortgage not repayable until more than five years after its date, ask whether paying principal and interest plus three months' interest in lieu of notice is possible; it does not apply to mortgages of corporations or prescribed mortgages.
• Consider whether selling the home yourself is a better route than a forced sale.

Frequently asked questions