Struggling to pay the mortgage?

LEGAL INFORMATION TOPICS

Many Nova Scotians live from pay cheque to pay cheque and worry about how they will pay the bills. Often the biggest monthly expense is the rent or a mortgage payment. Home owners may worry about losing their home if they can’t pay the mortgage.

If you have trouble making ends meet consider talking with a debt counsellor about how you can manage, reduce, or consolidate your debts so that you can make payments on time (click here to learn more about debt counselling & bankruptcy).

If you are a home owner and have a mortgage or loan secured on your home and you fall behind with the payments, the lender (also called the mortgagee) can start a legal process called foreclosure. Foreclosure means that a court orders your home be sold to pay off the mortgage. Most often the lender is a bank, credit union or other financial institution.

While most mortgages have an “acceleration” clause which means that even if you miss one payment, the full balance of the mortgage becomes payable immediately, lenders rarely try to foreclose if you miss one payment. They would rather give you an opportunity to make up the missed payment.

If you continue to fall behind or regularly miss payments, the lender will usually send you a demand letter or a letter calling for the balance before starting foreclosure proceedings. If the lender starts foreclosure you will receive personal notice. Foreclosure is a court process. Usually foreclosure takes 2-3 months. Your home will be sold at public auction.

You can stop foreclosure proceedings by paying the amount you owe in arrears to the lender. You can only do this once per mortgage. To do this you need to file documents in court. If your home sells for less than the amount owed on the mortgage at the auction, the lender may ask a court to require you to pay the balance. If it sells for more, the surplus will be used to pay any outstanding taxes on the property and any balance may be paid to your other creditors. If you don’t have other creditors, the surplus would be paid to you, if you file documents in court to get it.

If you are having difficulty making mortgage payments you should talk to the lender. The lender may agree to reduce payments by extending the term of the mortgage or allow you just to pay the interest on the mortgage, if it is a short term problem, for example, a short illness that prevents you working.If you receive a demand letter or notice of foreclosure, do not ignore it. Talk to the lender or get legal advice as soon as you can. Your lawyer can advise you on your options and whether you have a defence to the foreclosure proceeding.

Click here for answers to common questions about foreclosure, and download LISNS Fall 2008 Newsletter to learn about what you need to know in these tough economic times.