If your payments are becoming hard to make, call your lender early, before you miss one. Lenders have several ways to lower or pause payments, but most of them raise the total cost of the mortgage. Source: Financial Consumer Agency of Canada.
Extending the amortization
A longer amortization lowers each payment but adds interest. In FCAC’s example, a $300,000 mortgage at 5% costs $1,971.38 a month and about $173,130 of interest over 20 years, or $1,601.07 a month and about $276,386 over 30 years. The amortization schedule gives the same figures. Lenders are expected to keep the extension reasonable and explain how to get back to the original amortization.
Skipping or deferring payments
Some mortgages let you skip a set number of payments a year. A deferral usually lasts up to four months. The missed amounts are not forgiven: they are added to what you owe, which raises the balance and later payments.
Blending the rate
Blend-to-term mixes your current rate with today’s rate for the rest of the term; blend-and-extend does the same while starting a longer term. Either can lower payments when today’s rates are below yours.
Variable rate with fixed payments
If rates have risen past your trigger rate, part of the interest is not being paid and is added to the balance. Switching to a fixed rate can protect you from further increases; a lump-sum payment or a higher payment stops the balance from growing. Check yours with the trigger rate calculator.
Other options
- Interest-only payments for a short time, often with the deferred principal capped.
- Adding arrears to the mortgage (capitalization), which raises future payments.
- A claim on mortgage credit insurance, if you have it: benefits usually start after a waiting period and are capped each month.
- Selling the home yourself at fair market value while you still live in it.
Before you agree
Ask the lender for the new payment, the new balance and the total interest under each option, and compare them with the mortgage payoff calculator. If you have a home equity line of credit, the lender can lower the limit or ask for repayment; see the HELOC calculator.
Try the amortization schedule →
Official source
FCAC · Mortgage relief options
This guide explains general rules. Confirm your figures with your lender, lawyer, or the official source before you act.