Deferring Your Mortgage or Selling

Don’t bury your head in the sand; talk to your lender. Talking to one another can help find mutually beneficial solutions. Lenders don’ t want to own houses; they just want their money back.

If your job is gone and you know in your heart that you won’t be able to afford the payments going forward, selling may be the best solution for you and your family.

Foreclosures and bankruptcy leave negative blemishes on your financial resume (credit bureau). Future lenders will be reluctant to lend you money with a blemish like that. You can start over once you’re back on your feet. There will always be lenders willing to take a risk on you.

Deferring payments: This means not making all or some of your payment and any shortfall will be added to the outstanding principal. Interest will be charged on the total, meaning paying interest on unpaid interest.

*Note though that every province will have their own rules. This is how it works in BC

Foreclosure: This means the lending institution takes you to court and forces the sale of your home at fair market value. It generally takes between 6 months to a year depending on your equity (difference between the market value and the amount still owing). Beware though, one of the biggest costs is the interest that continues to compound during this process. Compound interest is like the exponential growth of a virus. Legal fees that the lender incurs for initiating the foreclosure process are very expensive and they will be paid out of your equity in the end when your home is sold. After all, is said and done and your home is sold, the lender will be paid the amount owing plus interest and legal fees. You will receive any money left over once everyone is paid. The amount you pocket will be significantly less if you live out the foreclosure period. This quiet period, during the foreclosure process, can give you a false sense of relief. The phone calls and demand letters will stop but the amount owing won’t stop growing and it’ll be eating away at your equity cash in the end.

The redemption period might sound like a break from the pressure and the payments but make no mistake, every day of the redemption period your balance due is growing/ compounding. Choosing to sell your property early in the process will save you money, stress and financial status. We’ve all had to start over, some of us more often than others.

Learn as much as you can about the foreclosure process in your province; face your fears and be the one in the drivers’ seat. Canadian courts are set up to protect the interests of all parties involved especially yours, the consumer.

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