Get Debt Relief from Your Mortgage, How to Avoid Foreclosure | Canada
By Julie Jaggernath
Worrying about debt is stressful. Worrying about how to avoid foreclosure is one of the most stressful situations someone can find themselves in. If you’re struggling to make your mortgage payments or if you can’t pay your mortgage at all right now, there are things you can do that will help you to avoid foreclosure and manage your situation better.
Ask for Help as You Consider Options to Alleviate Financial Hardship
Stress impacts our ability to think about our situation clearly. Although they might not be your first choice, don’t automatically rule out speaking with a trusted family member or friend. They care about you and don't want to see you struggle.
Getting their insight could help because they might be able to suggest something you hadn’t thought of. But go easy on them if they point out something you don’t want to hear; they’re only trying to help. If they aren’t able to suggest anything specific to alleviate your financial hardship, at least they can support you as you look at other options.
Talk to Your Lender – They Might Be Able to Help
Make an appointment to meet with your lender. If you haven’t missed a payment yet, they might not realize that you’re struggling. If you have missed payments, know that they do not want to become your landlord and will do what they can to help you. Some lenders have special hardship programs that you may qualify for.
If your mortgage is insured (meaning that you bought your home with a down payment of less than 20%) through CMHC (Canada Mortgage and Housing Corp.) or Genworth Financial, they also have programs to help people struggling with their payments. Either your lender or the company who insured your mortgage can provide you with more information about options which might be right for you.
Before You Plan to Sell Your Home
Your lender can also provide you with information about your mortgage terms and conditions, including how much it would cost to pay off your mortgage or move it to another property. This is important if you think that you may want to sell your home and look for something more affordable to rent or buy. However, before you consider selling your home, take a look at how much your debt payments, other than your mortgage, are costing you.
Dealing with Other Debts Might Be the Right Solution
If you notice that your debt payments are a lot each month, getting debt relief from your line of credit or credit card payments might mean that you can get back on track with your mortgage payments. Debt payments that use up more than 25% of your take-home pay each month are considered a lot. Before you consider selling your home or taking drastic measures to get mortgage debt relief, getting help dealing with your other debts might mean that you can manage your mortgage payments again.
How to Get Help with Your Debt
If you think that you might need help dealing with your debts or your mortgage, get help sooner than later. Not only will you feel better knowing how to handle your situation, you’ll have more options than if you delay. In extreme circumstances and for those who have ignored the problem for too long, bankruptcy may be their only option. However, before it gets to that point, take proactive steps to deal with your debts.
Consider Your Expenses
Part of dealing with your debts means knowing what your income and expenses are. Most people know how much money is coming in, but they’re less clear about where it’s all going, especially when they’re dealing with stressful circumstances. Start by jotting down all of your fixed expenses. These are the things you need to spend money on each month and the amount is usually the same. Some examples of fixed expenses are your mortgage, utility payments, daycare, gas (for your car) or a transit pass.
Then grab you bank statement or credit card bill and add expenses to your list that aren’t as regular. These variable expenses are there every month, but the amount changes. Some examples of variable expenses are groceries, eating out, entertainment, recreation, coffees / snacks, or even cell phone bills. Variable expenses aren’t optional; you do need to spend money on them, but you have more flexibility about how much you spend on variable expenses versus fixed expenses.
Create a Budget
A budget needs to be realistic and based on your current circumstances. If you’re facing reduced income, focus on your priorities and take care of the basics for now. If you aren’t sure how to get started with a budget, here are 7 steps that will help you build a budget that works. Or feel free to contact us and we’ll be happy to help you.
Reduce Your Spending or Increase Your Income
After you’ve got your budget outline, you’ll likely see areas where you could cut back a bit with your spending. Start with expenses that are easy to reduce and try cutting them back by half. Quitting cold turkey is hard because you’ve developed your spending habits over the last number of years. Your circumstances are stressful enough – don’t make them worse by setting yourself up to fail. And if there’s something you really can’t cut back on, look for ways to increase your income even just a bit. Could you take in a student or tenant, could you rent out your garage, have you got space out back for someone to park their RV during the off-season, could you take on an extra shift each week at work, or maybe your teenage children could start working part-time to earn their own spending money.
Track Your Spending
If you can’t see where to reduce your spending, try tracking your expenses for a few weeks to get a better handle on your spending habits. Track expenses that you’re not sure about, like if you shop at all-inclusive grocery stores. If you can buy milk, pizza and new patio furniture all at the grocery store, try tracking what you spend in that store. You might be surprised how much you buy in addition to your groceries! Also, don’t forget to keep track of how often you buy coffee or snacks on the go. Every little bit counts. If you need help tracking, try using our expense tracker, a little notebook or a free app on your phone to get started.
The Bottom Line When You Need Debt Relief from Your Mortgage and to Avoid Foreclosure
While this is a very difficult and stressful time for you, you’re not the only one who has ever struggled to make their mortgage payments, or think they need to get out of mortgage debt fast, so don’t feel bad. Instead, use this as a wake-up call to get your financial house back in order. You have lots of options to get help, deal with your debts and avoid a mortgage foreclosure. We’re happy to help you too. Just give us a call.
I am struggling with my mortgage payments right now due to financial hardship. I called the CMHC about help and they tell me to call my bank. I call my bank and they cannot help either. The bank cibc is just not willing to help or budge. I do not believe that the CMHC helps at all. Any insight would be extremely helpful.
You're in a tricky situation and it sounds like you could use help that goes beyond just your mortgage payments. This is where organizations like ours come into the picture.
We are experts at helping people work through difficult financial situations.
To see what can be done in your situation, we would suggest that you give us a call and make an appointment (it can be a telephone appointment if you like) to speak with one of our Debt Counsellors.
Our appointments are free, confidential and intended to give you information and guidance. The Counsellor will explain your options and answer your questions. Then, armed with information, you can decide what you'd like to do and how best to get your finances back on track.
My 7 year old home has leaks that were just discovered but the house has been leaking for awhile and now has some mold. The cost of fixing this and the loss of rental income because of the problem will leave me in a desperate situation. What can I do?
Sorry to hear about this emergency expense and temporary loss of income. As you are dealing with a toxic substance in your home, remember that the health of you and your family should come first. To deal with the cost of the repair, contact your home insurance provider to understand your coverage. Consider ways in which you may be able to fund this renovation such as using a tax return or increasing your income until it has been completed. If you must reach for credit and are concerned that you may not be able to repay it, our Credit Counsellors are here to help you understand all of your options for dealing with debt. They can also help you learn how to handle the loss of rental income by creating a budget that is workable for you, and provide you with unbiased solutions to take care of your debt. Our appointments are free of charge, confidential, and will help you avoid feeling like you are in a desperate situation.