Financial Action Plan: How to Deal with Mortgage Arrears in Ontario

Here is a practical and realistic Financial Action Plan for a homeowner in Ontario dealing with mortgage arrears. This plan helps you assess the situation, take immediate action, and explore your options to avoid losing your home.

Step 1: Assess the Situation Immediately

  • Review your mortgage terms: Note your interest rate, monthly payment, arrears amount, and lender contact details.
  • Calculate your arrears: Include missed payments, late fees, legal fees (if a Notice of Sale has been served), and any unpaid taxes or insurance.
  • Check your current financial position: List your income, fixed expenses, available savings, and debts.

Goal: Know exactly how much you owe and what you can afford to contribute now.

Step 2: Contact Your Lender

  • Call your mortgage lender’s collections or loss mitigation department.
  • Explain your situation honestly (job loss, illness, rate increase, etc.).
  • Ask about available options, such as:
    • Payment deferral
    • Repayment plan
    • Interest-only payments for a short time
    • Capitalizing arrears into the mortgage (if refinancing)

Tip: Request a “redemption statement” (or reinstatement quote) detailing the full amount needed to bring your mortgage current.

Step 3: Create an Emergency Budget

  • Cut non-essential spending immediately
  • Pause discretionary expenses (subscriptions, dining out, shopping)
  • Prioritize mortgage payments, utilities, and basic living costs
  • Look for temporary income boosts (side gigs, selling items, support programs)

Goal: Free up cash flow to put toward your arrears quickly.

Step 4: Explore Financing Options

Work with a mortgage broker if needed to assess:

  • Second mortgage or HELOC (if you have equity)
  • Private lender short-term financing (for quick solutions)
  • Refinance with a new lender to consolidate arrears
  • Line of credit or personal loan (as a temporary band-aid)

Documents you’ll likely need:

  • Property value estimate or appraisal
  • Current mortgage balance and arrears
  • Proof of income
  • Credit report

Step 5: Prepare a Backup Plan

If keeping the home is not financially viable:

  • List the property for sale (voluntarily) before the lender does
  • Work with a real estate agent to maximize sale price and retain equity
  • Use proceeds to pay off the mortgage and any legal fees

If you’re severely underwater:

  • Consult a Licensed Insolvency Trustee to explore a consumer proposal or bankruptcy
  • This can pause legal action and give you time to regroup

Step 6: Track Everything and Follow Up

  • Keep a written log of all communication with your lender or their lawyer
  • Store all statements, emails, and payment confirmations
  • Follow up after any agreement to ensure it’s being honoured

✅ Summary Checklist

✅ Calculate total arrears and review your mortgage terms
✅ Contact lender and ask for a repayment or deferral plan
✅ Build a crisis budget and cut unnecessary spending
✅ Consult a broker for refinancing or second mortgage options
✅ List your home for sale if needed (voluntarily)
✅ Speak to a lawyer or trustee if power of sale has begun
✅ Track all documents and communications

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Ksenia Bichek

I'm a licensed Ontario mortgage agent & realtor, and Lead Writer at FinanceVine. I create educational content about mortgage, real estate, and insurance. Reach me at: [email protected].