Acting Quickly After Job Loss to Protect Your Mortgage

The speed of your reaction determines your options. The sooner you act, the more numerous and advantageous the solutions. A late payment reported to credit agencies can affect your score for 6 to 7 years and compromise your ability to refinance. Here is your structured action plan for navigating this difficult period while protecting your real estate assets.

Immédiate five-step action plan

1. Assess your immédiate resources: Take a complete inventory of your resources: emergency savings, Employment Insurance (55% of insurable earnings, maximum about $668 per week), mortgage insurance if you subscribed to job loss coverage, severance pay from employer, liquidable investments (TFSA, non-registered accounts), and your spouse's income if applicable. Calculate how many months you can hold without employment income.
2. Contact your lender immediately, before missing a payment: Call the borrower assistance service (not general customer service) and explain your situation honestly. Indicate the cause of job loss, your current resources, and your plan for returning to employment. Lenders prefer finding solutions rather than initiating costly foreclosure proceedings. Ask about deferral, modification, or temporary arrangement options.
3. Check all your insurance: Job loss insurance on the mortgage (check the 30 to 90 day waiting period and exclusions such as voluntary resignation or dismissal for cause), former employer group insurance that may continue temporarily, and severance pay that can be spread out or paid in a lump sum. Submit your claims as quickly as possible.
4. Consult an AMF-certified mortgage broker: A broker can negotiate with your lender on your behalf through their professional relationships and expertise. They also explore alternatives: refinancing with another lender if you have enough equity, transfer to a lender offering better deferral conditions, or debt consolidation to reduce your total monthly obligations.
5. Adjust your budget and prioritize the mortgage: Immediately reduce all non-essential expenses. The mortgage must be your absolute payment priority to protect your credit score and assets. Suspend prepayments and non-essential savings contributions. Every dollar counts during the transition period.

Modification options available from lenders

• Full payment deferral (1 to 6 months): no payment during the period, but interest accrues and is added to principal. On a $300,000 loan at 5%, a 3-month deferral adds about $3,750 to principal.
• Amortization extension: reduces monthly payments by 10 to 15% by spreading the debt over a longer period. Amortization can be brought back to the original level at the next renewal.
• Interest-only payments (3 to 12 months): temporarily eliminates principal repayment, reducing payment by 40 to 60%. Principal does not decrease during this period.
• Refinancing: if you have enough equity in the property and a credible return-to-work plan, refinancing can consolidate your debts and reduce your total monthly obligations.

Each option has long-term consequences on the total cost of your mortgage. An AMF-certified broker helps you choose the one that best preserves your overall financial situation, comparing the costs of each scenario with your actual data. The goal is to navigate the difficult period without compromising your assets or future borrowing capacity.