Economic Challenges and Rising Mortgage Delinquency in Canada

High interest rates and persistent inflation have contributed to an increase in mortgage delinquency in certain provinces, according to recent analysis by Equifax Canada.

Missing a mortgage payment can happen for a variety of reasons — sometimes by accident, other times due to financial strain. Whatever the cause, addressing the issue quickly is key to minimizing its impact.

What Happens If You Miss a Mortgage Payment?

While lenders can pursue legal action after a 15-day grace period, this rarely occurs. Typically, the process unfolds in the following stages:

Late Fees Are Charged

Your mortgage agreement outlines the fees and terms for late payments. These fees usually range from $25 to $50 and can be applied as soon as a payment is missed.

Impact on Your Credit Score

After 30 days, your lender reports the missed payment to the credit bureaus. Each bureau (Equifax and TransUnion) calculates credit scores differently, but a history of late payments will negatively affect your score.

Even after catching up on payments, the late payment remains on your credit report for up to seven years.

Mortgage Default

If a payment is not made within 30 days, the mortgage may go into default. This is a serious issue that can significantly damage your credit and potentially lead to foreclosure.

Risk of Losing Your Home

Since your home serves as collateral, lenders have the legal right to repossess and sell the property to recover their losses if payments are not made. This process is called foreclosure.

Foreclosure

The foreclosure process varies by province. In British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, and Nova Scotia, it is known as judicial foreclosure or judicial sale. This process can take up to six months and involves the court system. Ultimately, the title of the home is transferred to the lender, who retains the sale proceeds.

How Many Payments Can You Miss Before Foreclosure in Canada?

Foreclosure is costly and time-consuming, so it doesn’t happen immediately. Typically, lenders send reminders at 30, 60, and 90 days after missed payments. If you have not addressed the issue by 90 days, foreclosure proceedings may begin.

Power of Sale

In Newfoundland, New Brunswick, Prince Edward Island, and Ontario, lenders use a “power of sale” process instead of foreclosure.

• The lender sends a notice giving you 35 days to catch up.
• If you pay within this window, the process stops, but you still incur fees, and your credit score is affected.
• If not resolved within 35 days, the lender can take ownership of the property without court involvement, making it a faster process than judicial foreclosure.

How Late Is a Payment Considered “Missed”?

Most Canadian lenders offer a 15-day grace period. Payments made within this period are not considered missed, and late fees usually aren’t charged until after it ends.

Once a payment is 30 days late, the lender reports it to credit bureaus, marking the beginning of more severe consequences.

Understanding a “Rolling Late” Situation

Missing one mortgage payment and then resuming the next month without making up for the missed payment does not reset your schedule. The next payment is treated as a late installment of the original missed payment.

Until you catch up on the missed payment, you remain in a “rolling late” situation, which means:

• Late fees continue to accrue each month.
• Your credit score continues to be affected.

The ay to stop a rolling late scenario is to make up the missed payment immediately, then return to your regular payment schedule.

If You Think You Might Miss a Payment

Be Proactive

Contact your lender as soon as possible. Early communication increases the chances they will work with you to minimize consequences.

Make a Payment ASAP

Depending on your situation, lenders may accept a late payment (sometimes with a fee) or help you establish a repayment plan. Options could include:

• Adjusting the mortgage term or amortization
• Arranging a second mortgage
• Offering a payment deferral

If You’ve Already Missed a Payment

The sooner you speak with your lender, the more options you will have to stay on track and protect your home.

If your financial situation has changed drastically and you anticipate future difficulty making payments, consider consulting a lawyer or mortgage broker. 

Foreclosure and bankruptcy have long-term consequences, so in some cases, selling your home may be a better alternative than facing these worst-case scenarios. Contact us for more information

FAQs About Missed Mortgage Payments in Canada

What happens if I miss a mortgage payment?

If you miss a payment, you may be charged late fees, and your credit score could drop. If unpaid for long enough, your mortgage could go into default, potentially leading to foreclosure or power of sale, depending on your province.

How long do I have before a mortgage payment is considered missed?

Most Canadian lenders offer a 15-day grace period. Payments made within this period are not considered missed, and late fees usually apply only after the grace period ends.

How much are late fees on a mortgage?

Late fees typically range from $25 to $50, but your mortgage agreement will specify the exact fees and conditions.

Will missing a mortgage payment affect my credit score?

Yes. If a payment is more than 30 days late, your lender will report it to the credit bureaus. Late payments can remain on your credit report for up to seven years, affecting your creditworthiness.

What is a “rolling late” situation?

If you miss a payment and then continue with your following scheduled payments without making up the missed amount, you are in a “rolling late” situation. This means subsequent payments are treated as late, and late fees and credit score impacts continue until the missed payment is made up.

How many missed payments will trigger foreclosure?

Foreclosure usually starts after repeated missed payments. Lenders often send notices after 30, 60, and 90 days. If the situation isn’t resolved by 90 days, foreclosure proceedings may begin (judicial foreclosure or power of sale, depending on the province).