Can You Defer a Mortgage Payment in Ontario? Your Options

If money is tight for a short time, pausing your mortgage can seem like the obvious fix. Many people ask whether the lender has to agree. Generally it does not, and a pause has a cost.

This article explains what a deferral is, what it does to your balance, and what other options lenders may offer. Your mortgage contract and lender type matter, so confirm details with the lender or a lawyer.

Is a deferral a right?

No. A mortgage payment deferral is an agreement with the lender, not a right. It usually lasts up to 4 months.

Banks and other federally regulated lenders are expected to give tailored relief to borrowers at risk of default on their principal residence, under FCAC's Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances. That is an expectation, and no lender is required to grant a deferral.

Provincially regulated and private lenders are not covered by those federal expectations. What they offer depends on your contract and on the lender, so ask directly what help is available.

If your mortgage is with a private lender, FSRA says private mortgages are generally a short-term option, often for one or two years, and are often interest-only. Fees are often higher than for a traditional mortgage, and private lenders may charge fees for late payments, lapsed insurance or property upkeep. FSRA also says borrowers should have an exit strategy and consider independent legal advice before signing.

What a deferral does to your mortgage

Interest keeps accruing during a deferral and is usually added to the principal. Afterwards you will owe more, and your payments or amortization may increase.

So a deferral postpones the cost; it does not remove it. Ask the lender for the new balance, new payment and new amortization in writing before you agree.

Relief that may be available

For federally regulated lenders, relief can include extended amortization, waived prepayment penalties and internal fees, and allowing a missed payment without reporting it to credit bureaus. Your express consent is required.

Exception: these expectations apply to banks and other federally regulated lenders, and only for an existing residential mortgage on your principal residence. They do not extend to provincially regulated and private lenders.

• Blend-and-extend.
• Capitalizing missed payments.
• Interest-only payments for a limited time.
• A sale-by-borrower plan, where you sell at fair market value and can usually stay up to 90 days.

If you fall behind anyway

Despite any agreement to the contrary, a borrower in default can stop a lender from enforcing the acceleration clause by paying the amount due under the mortgage and the lender's necessary expenses. That means the arrears, not money that is only due later. Exception: once a power of sale has closed, this right no longer applies, and the borrower is limited to a claim for damages against the lender.

You can give the lender written notice requiring a written statement of the arrears and expenses. The lender must answer within 15 days. No fine, penalty or rate of interest may be charged on mortgage arrears that increases the charge on the arrears beyond the rate payable on principal not in arrears.

Where a mortgage has a power of sale, notice of sale cannot be given until the default has continued for at least 15 days, and the sale cannot happen until at least 35 days after the notice is given. The notice must go to every person having an interest in the property. Exception: if the mortgage has no power of sale clause, the statutory power of sale applies only after three months' default and requires 45 days' notice to persons having an interest in the property.

Once a demand or notice of sale has been given, the lender cannot start any further proceeding to enforce the mortgage until the time stated in the notice has passed, unless a Superior Court judge permits it. A spouse with no ownership interest in the matrimonial home but with a right of possession has the same right of redemption or relief against forfeiture as the owner-spouse, and is entitled to the same notice.

Selling or moving instead of deferring

If a deferral is not offered, or only delays the problem, selling may be a way out. Some lenders offer a sale-by-borrower plan, where you sell at fair market value and can usually stay up to 90 days.

If you plan to sell and buy again, a portable mortgage lets you transfer your existing balance, interest rate and terms to a new home, which avoids breaking the contract. Whether your mortgage can be ported, and on what conditions, depends on the lender. If the new home costs less than the amount of the mortgage, you may still pay a prepayment penalty.

If you break a mortgage contract, the prepayment penalty is usually the higher of 3 months' interest on what you still owe or the interest rate differential. Check your contract and ask the lender for a figure before you decide.

What to do next

• Contact your lender early, before you miss a payment if possible.
• Find out whether your lender is federally regulated, provincially regulated or private.
• Ask what a deferral or other relief would do to your balance, payments and amortization.
• Get any agreement in writing before relying on it.
• Speak with a lawyer if you have received a demand or notice of sale.

Frequently asked questions