Mortgage relief options
The Financial Consumer Agency of Canada (FCAC) has expectations for federally regulated financial institutions. FCAC expects them to help you if you're struggling to pay your mortgage due to exceptional circumstances.
Learn more about paying your mortgage when experiencing financial difficulties.
Facing financial difficulties as a mortgage holder
You may be facing financial difficulties due to exceptional circumstances. This may affect your ability to make your mortgage payments.
Examples of exceptional circumstances include the combined effects of:
- high household debt
- increased cost of living
- rapid increases in interest rates
Rapid increases in interest rates may have a major impact on your finances.
This may be the case if your mortgage has a:
- fixed rate and is up for renewal, and you’re facing much higher payments
- variable rate and your payments are much higher
- variable rate with fixed payments, and you’ve reached, or expect to reach your trigger rate
The trigger rate is the interest rate at which your mortgage payment only covers interest costs. When you reach your trigger rate, none of your payment goes toward paying down the principal. This means that your payment may not cover the full amount of interest for that period.
When this happens, your bank will generally add the unpaid interest to the balance you owe on your mortgage. This brings your mortgage into negative amortization.
In cases of negative amortization, financial institutions normally charge interest on the unpaid interest. This builds up and the total amount you owe will continue to increase. If you don’t take action, you’ll owe more money than you expected on your mortgage.
If you’re experiencing financial difficulties, contact your financial institution as soon as you can. Ask about options that may be appropriate for your circumstances.
Renegotiating your current mortgage
You may be able to renegotiate your mortgage agreement.
This may allow you to:
- improve your financial stability by converting from a variable to a fixed interest rate if interest rates are going up
- take advantage of a lower interest rate if interest rates are going down
Contact your financial institution about your options when interest rates change.
Converting a mortgage from a variable to a fixed interest rate
You may be able to convert your mortgage from a variable to a fixed interest rate. This option may also protect you if there’s a sudden increase in interest rates.
Learn about managing your money when interest rates rise.
Opting for the blend-to-term or blend-and-extend option
Some financial institutions offer blended options. These options may lower your mortgage payments if the current interest rate is lower than your current mortgage interest rate.
With a blended option, your financial institution determines a new interest rate for your current mortgage. They get this rate by combining your mortgage interest rate and the current rate.
Blended options may impact the length of your term. Your mortgage term is the length of time your mortgage agreement is in effect. It doesn’t impact your amortization. Your amortization is the time it takes to pay your mortgage in full.
Blend-to-term
With a blend-to-term option, your new interest rate is in effect until the end of your term. For example, suppose you have 2 years left on your term. With a blend-to-term option, your new blended rate is in effect for 2 years.
Blend-and-extend
With a blend-and-extend option, you extend the length of your mortgage term. This allows you to benefit from your new interest rate for a longer period. For example, suppose you have 2 years left on your term. With a blend-and-extend option, you may enter into a new agreement for 5 years. Financial institutions also call this an early renewal.
Learn more about the blend-and-extend option.
Leveraging your mortgage features
Your mortgage agreement may include features that could help you if you’re facing difficulties paying your mortgage. Check your mortgage agreement or contact your financial institution to find out what features are available to you.
Prepaying and re-borrowing
You may have made additional payments during your current mortgage term. Financial Institutions usually call this prepayment or lump sum payment. If that is the case, your financial institution may allow you to re-borrow the amount you prepaid.
Your financial institution will typically add this amount to your mortgage principal. This will increase your interest costs.
Learn more about lump sum payments.
Skip a payment
Your financial institution may offer a “skip a payment” option. Financial institutions also call this option “payment pause,” “miss a payment,” and “take a break.”
You may typically use this option for a maximum number of mortgage payments each calendar year.
Your financial institution may require you to have made a prepayment to qualify for the “skip a payment” option. In that case, your financial institution typically applies the amounts you prepaid on your mortgage to cover your skipped payment. In other cases, when you use the “skip a payment” option, you defer your mortgage payments.
Learn more about deferring your mortgage payments.
Home equity line of credit
A home equity line of credit (HELOC) is a form of revolving credit where you use your home as security. With a HELOC, you may borrow money, pay it back, and borrow it again, up to a maximum amount. The maximum amount you can borrow is called your credit limit. It’s determined by the equity in your home and the type of HELOC you select.
A HELOC typically has a variable interest rate. You usually have no fixed repayment amounts for a HELOC. Your lender may only require you to pay interest on the money you use.
Using a HELOC to make your mortgage payment may put you at risk. At any time, your financial institution may decide to lower your HELOC limit. They may also ask you to pay the full amount at any time.
Learn more about home equity lines of credit.
Credit insurance claim
You may have optional credit insurance on your mortgage.
If this is the case, you may qualify for a credit insurance claim if you:
- lose your job
- become critically ill
- become disabled
Your credit insurance provider may require that you:
- meet the conditions set out by your financial institution
- submit your claim within a limited period
If your credit insurance provider approves your claim, you’ll typically:
- need to wait 1 or 2 months before your claim payments start
- have a maximum monthly benefit, usually around $3,000
- benefit from claim payments for a limited amount of time
Read the terms and condition of your insurance certificate for more information. Check with your financial institution or credit insurance provider about the rules for credit insurance claims.
Considering other types of mortgage relief measures
Mortgage relief measures may help in the short term if you’re at risk of mortgage default. A mortgage relief measure, or a combination of relief measures, may be appropriate for your circumstances. Contact your financial institution to discuss the options available to you.
Federally regulated financial institutions, like banks, are expected to offer mortgage relief measures appropriate for your circumstances.
Mortgage relief measures may end up increasing the total cost owing over the total length of your mortgage.
Mortgage payment deferral
With a mortgage payment deferral, you enter into an agreement with your financial institution. This agreement allows you to delay your mortgage payments for a specific period, usually up to 4 months.
After the deferral period ends, you resume making your mortgage payments. You’ll need to repay the mortgage payments you defer.
As a result, after the deferral period ends:
- your amortization, the length it takes to pay off your mortgage, may be longer
- you’ll owe more money on your mortgage than before the deferral period
- your mortgage payment amount may be higher
Learn more about mortgage payment deferrals.
Extended mortgage payment deferral
Extended mortgage payment deferrals are for a longer period than the standard deferral period of up to 4 months. Usually, you may only defer your payments up to a predefined amount, for example, $10,000. After you reach this amount, you need to start making your regular payments again.
Extension of amortization
Think twice before extending your amortization to lower your payments. The interest costs that you’ll need to pay will be higher. This may add up to thousands or tens of thousands of dollars.
Contact your financial institution to discuss your options.
Use the Mortgage Calculator to estimate your payment amounts and interest costs.
Extending your amortization period lowers your mortgage payments. Keep in mind that the longer you take to pay off your mortgage, the more you’ll pay in interest.
Text version
20-year amortization: 240 monthly payments of $1971.38, interest costs $173,130
30-year amortization: 360 monthly payments of $1601.07, interest costs $276,386
*The costs shown in this example are for illustration purposes only based on a $300,000 mortgage with a 5% interest rate.
This maximum amortization period depends on:
- your financial institution
- whether your mortgage is insured or uninsured
If your down payment was less than 20% of your home’s purchase price, you had to get mortgage insurance. The maximum amortization period for an insured mortgage is 25 years.
Federally regulated financial institutions, like banks, are expected to develop a plan with you when they extend your amortization. This is the case if you’re at risk of mortgage default.
This plan should:
- ensure that your total amortization period is reasonable
- include information about your options to restore the amortization to its original period
- include an assessment and communication of the potential long-term, negative financial implications of this change on you
Learn more about mortgage amortization.
Special payment arrangements
Your financial institution may offer special payment arrangements unique to your situation. Special payment arrangements may include reducing your mortgage payments for an agreed-upon period. This option may help you if you’re late in making your mortgage payments.
With this option, your financial institution recovers your late payments over the shortest period, within your financial ability.
Capitalization
With a capitalization option, your financial institution allows you to add late payments to your mortgage principal.
Your financial institution may allow you to capitalize:
- missed mortgage payments and interest
- property tax payments
- utility bills
- property repair costs
- condo fees
- other outstanding charges
With this option, your financial institution increases your mortgage payments to reflect the increase of your mortgage principal. This means your mortgage payments will be higher.
Interest only payments
Your financial institution may allow you to only pay the interest portion of your mortgage payments. This may be the case if you’ve already extended your amortization and/or used the capitalization option.
With this option, you defer the payment of the principal. Your financial institution may allow you to defer your mortgage principal payments up to a maximum amount, usually $10,000. They may also require that you repay the deferred principal payments over a specific timeframe, usually within 2 years.
Selling your home
When circumstances change, your long-term financial well-being is an important consideration. If you’re at risk of mortgage default and experiencing severe financial difficulties, selling your home may be an option.
Selling your home may offer several potential benefits.
For example, it may help you:
- lower your mortgage payments if you downsize
- reduce your expenses including your utilities and property taxes
- access the equity you have in your home
Your financial institution may be able to help you if you’re facing financial difficulties. For example, they may offer a sale by borrower plan.
Sale by borrower plan
With this plan, your financial institution allows you to sell your home for a fair market value. You continue to live in your home while it’s for sale. This is typically for a period of 90 days or less. During this time, you agree to occupy and maintain the home.
You may need to continue to make payments or partial payments toward the mortgage.
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