Mortgage Loan Strategy
Depending on what type of mortgage you have, your debt repayment or debt consolidation loan strategy will differ. In Canada there are two types of mortgages: Conventional and high ratio.
High Ratio Mortgages
In Canada, mortgage insurance is required under the Bank Act Law for those who put down less than a 20% down payment on a property. This means that if you purchased a home with a high ratio mortgage you also had to purchase mortgage default insurance. If you have gone into mortgage debt and are unable to repay the mortgage after the sale of your home, the lender will submit a claim to the mortgage insurer who will then pursue you for the money you owe.
Getting Out of Mortgage Debt
Often, personal guarantees from third parties are required by lenders for additional security. If you are unable to repay your mortgage debt after selling your home, the lender can call on your guarantor to repay the outstanding balance.
If you have an insured mortgage and are unable to make a mortgage payment and know that you will quickly fall behind on your payments, you can call the Canada Mortgage and Housing Corporation (CHMC) for help and mortgage debt-specific advice.
Mortgage Debt & Filing for Bankruptcy
If you cannot pay into your bankruptcy estate the amount of your equity in a reasonable amount of time, your licensed insolvency trustee will be forced to sell your home in order to obtain the equity for your bankruptcy estate. Another alternative to bankruptcy is to file a consumer proposal. This will prevent you from filing for bankruptcy and losing your property and prevent you from losing your home.
Generally, if you have a good track record of paying your mortgage, your mortgage company will likely allow you to renew your mortgage during and after bankruptcy. The reason for this is because the bank would rather you renew your mortgage and continue to pay the principal amount and interest rather than having you sell your property and losing out on the potential for future profits.
If you would like more information about mortgage debt, debt consolidation, a consumer proposal or filing for bankruptcy, please contact Dana MacRae Licensed Insolvency Trustee today. You’ll be able to get your life back on track and stop worrying about debt problems!
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