I'm Behind on Mortgage Payments: What Can I Do About My Mortgage Arrears?

Most of us dream of owning a home. We save for a down payment and buy our home, but what can we do if something goes wrong and we get behind on mortgage payments? If you fall too far behind in your mortgage payments, the mortgage lender will eventually foreclose on your home; therefore, mortgage arrears should not be ignored.

Money problems may be caused by job loss, a marriage break up, or even unexpected home repair expenses.

Serious financial problems don't usually go away on their own; you need a plan. If you have money problems and are falling behind on your mortgage payments, here's our five point plan for dealing with your mortgage arrears:

1. Find the cause of your money problems

The first step to getting back on track is to determine how your money problems started. How did you get into this mess? Are your money problems temporary, or more likely to last for a long time. If you were laid off for a short period of time, you can probably get back on track when you get back to work. If you suffered a serious injury and are not likely to be returning to work, your money problems may be more permanent, so a more permanent solution will be required.

2. Make a plan NOW

Now that you know how your mortgage arrears developed, you can make a plan to deal with the problem. Don't hesitate. money problems don't get better on their own. Make a plan NOW. The sooner you deal with your money problems, the sooner you will be back on track.

3. Make a budget

The most important element of a plan is a budget. A budget doesn't need to be anything fancy. It's simply a list of all the money that comes in every month (your pay, your pension, etc.) and all of your monthly expenses (mortgage payments, food, utilities, and so on). If your money problems are caused by a reduced income, your budget will help you determine if you can still afford your house.

4. Talk to your lender

Now that you know how much money you have to spend each month, talk to your mortgage lender. You may be able to negotiate better terms on your mortgage.

For example, it you are paying $1,000 per month and have 15 years left on your mortgage, but cash is tight each month, you may be able to increase your mortgage amortization period to 20 years, and reduce your mortgage payments to $800 per month to help ease the cash crunch. Of course, this would add 5 years of payments to your mortgage, so you need to decide if it makes sense for you. To help you make an informed decision, moneyproblems.ca provides a free mortgage payment calculator that you can use to compute and compare monthly payments and total cost of borrowing per different amortization periods.

If your problems are temporary, most lenders will allow you to skip a month (they add the payment on to the end of your mortgage); this temporary suspension of payments may allow you to get back on track. Remember: don't expect your lender to come up with a plan to help you. You need to work out a plan before you go to meet with your banker.

5. Get professional advice

Negotiating with a lender can be intimidating. Some people are embarrassed; others are afraid that they won't know what to say. One solution may be to get professional advice. You can talk to a Mortgage Broker about your situation. They will review your finances and suggest alternatives for dealing with your debts. It may even be possible for them to help you switch to a different lender.

If your money problems are more serious, talking to a credit counsellor or a bankruptcy trustee may be an option as well.

The bottom line is this: mortgage arrears, as with all money problems, won't go away on their own. If you are behind on mortgage payments it is best that you assess your situation, make a plan, and deal with your financial problems now.