Worried about defaulting on your mortgage? All of a
sudden, your financial life feels a bit like that blockbuster
movie: the one with the hero being pursued by some
powerful and relentless alien monster. In your nightmares,
though, it’s called “debt” – and it’s just as ugly and
frightening. The good news is that the hero generally wins
– by finding the right weapon at the right time. Fighting
debt is a lot the same. When you’re feeling pursued by
the debt demons, it’s time to get smart about finding your
own best weapons.
If you’re barely staying ahead of the mortgage, you’re not
alone. For many Canadians, a drop in income has meant a
struggle to keep up with monthly bills. As a nation, we’re
starting to pile on credit-card debt – just to get by.
According to Equifax, the average delinquency rate for all
types of credit excluding mortgages was up 19% in May
2009 over 2008. BMO Capital Markets recently estimated
that more than 150,000 households in Canada were
experiencing some degree of stress in meeting their debt
obligations. And other stats show the same picture –
Canadian Bankers Association reports mortgage arrears
were 0.4% in May 2009, up from 0.26 a year earlier, while
the Office of the Superintendent of Bankruptcy noted that
consumer bankruptcies rose 31% year over year to the end
of April 2009.
It can be tempting to want to conceal your debt problem
for as long as possible – but that’s almost never the best
strategy. Your mortgage lender doesn’t want to see you
default on your mortgage; they’d much rather help
homeowners find a way to keep their home.
For mortgages insured by the Canada Mortgage and
Housing Corporation (CMHC), they have identified several
tools available to help you ride out a period of economic
uncertainty:
1. You may be able to convert a variable-interest
rate mortgage to a fixed-rate mortgage: a strategy
that can protect you in the event of a sudden jump
in interest rates.
2. Your lender may be willing to offer a temporary
payment deferral, or other flexible options for shortterm
relief. If you’ve made any lump-sum payments
against your mortgage in the past – or if you’ve been
on an accelerated payment schedule before – that
history can help.
3. You may be able to extend your amortization period to
reduce your monthly payments. You can shorten the
amortization again later if your circumstances change.
4. If you’ve actually missed a few payments already, you
may ask if the lender is willing to add them to the
mortgage balance and extend the payment period
accordingly. (Best, however, to start talking before
you start missing payments!)
5. A special payment arrangement for your situation may
also be possible.
Ultimately though, it’s best to seek help at the first sign of
financial trouble. A chat with an experienced independent
mortgage planner is often a great place to begin – because
they are working for you, not the lender, and they know
what the lenders are after. It can be easier to be completely
open about your situation. Independent planners also have
access to a huge range of lenders, so they can help you
build a tailored financial solution.
It’s possible that your financial situation just requires some
extra penny-pinching to stay on budget. But if you find
yourself adding to your credit card debt – or borrowing
to make mortgage payments – then it’s time to call an
experienced mortgage planner. The earlier you get help,
the easier it will be to conquer your debt demons!
