What if a major life change, like a new baby, injury, illness or job loss makes paying the mortgage challenging? What should you do? Your first step is to talk to your lender as soon as possible. Many people don’t approach their financial institutions until their backs are against the proverbial wall, but once you’ve already missed a few payments, your options are more limited and other problems are also in play.
Most major lenders have a department specifically designed to work with people in tough situations and there are solutions out there to help you in the interim…any bit helps, right?
Most lenders do allow you to skip payments, but there are rules around what mortgages apply. Some don’t allow this if your mortgage is in arrears or your current mortgage balance, together with the amount of payments you wish to skip, exceeds the original amount of the mortgage. Even with skipped payments, you will still be responsible for paying your usual insurance premiums and property tax installments (if applicable.)
Find out if any fees are charged for this option and how often the lender allows you to skip payments. How many consecutive weeks can you skip payments – is it every year or only in the lifetime of the mortgage? Is a skipped payment available on every mortgage term? What additional requirements are there for CMHC-insured mortgages? Every lender has a different policy so ensure you ask the right questions.
Sometimes a debt consolidation is the right solution. A mortgage payment is only one of the many other payments you most likely have, so speaking with your lender about the bigger picture may be the right option for you, especially if your particular mortgage doesn’t fit the skipped payment criteria. Sometimes consolidating loans, lines of credit and credit card balances into one single payment with a reduced interest cost, could be the relief you need and help you find that extra cash to make your mortgage payments.
Another possibility is reducing your monthly payments by extending your mortgage amortization, for example from 20 to 25 years. You could also check if current interest rates are a bit lower and ask about getting a blended rate—the rate between your existing rate and the current rate. Often this can make a big difference in the monthly payment and the fees are relatively low—usually only a few hundred dollars.
These are just a few ideas. Taking the initiative to talk to your lender and work out a plan will help you keep your financial head above water until your current challenge passes.
Jennifer Birch – Realtor