In 2014, homeowners that received foreclosure notices reached a five-year high. However, before throwing in the towel and losing their residence, homeowners who struggle to make their mortgage payments may still consider the following alternatives.

Six ways to save your home from foreclosure

1. Negotiate with the financial institution

   If the financial hardship is temporary, the most convenient solution is to contact your financial institution to make a specific arrangement. It may then be possible to benefit from lower mortgage payments for a defined period. For example, such a solution might allow someone who lost his or her job to have more leeway until he or she finds a new one.

2. Try and obtain a new mortgage from another financial institution

   Financial institutions, as well as mortgage brokers, are very aggressive. Many offer promotions to attract new clients. Some savings could be made by moving one’s mortgage to another financial institution which offers lower interest rates. But one would then be well advised to take into account the penalty for reimbursing the mortgage before it expires. Crunching some numbers would be required to assess what the projected savings will be. On the other hand, such a solution is not within everyone’s reach, given the financial institutions’ rigid approbation criteria.

3. Find a roommate

   If it always seems that a bit more money is needed when the time comes to make a mortgage payment, finding a roommate could be a good idea. The rent thus paid by the roommate would provide an additional income that should lessen the burden of the mortgage payments.

   Of course, hosting a roommate requires some sacrifices. For example, the kids may have to share a room in order to free one up for the roommate. But, despite the form of adaptation this solution certainly entails, it may very well allow to reach the desired objective, which is to avoid foreclosure.

4. Rent your house

   Renting your house may prove to be a good solution to get out of a financial deadlock. It is a worthy alternative for people who, not being in favor of having a roommate, do not want to sell their house and hope to avoid foreclosure.

   To guarantee the profitability of this solution, one will however have to apply the following measures:

   • establish the rent by making sure it covers not only the mortgage payment, but also a part of the municipal and school taxes;
   • find a reliable tenant, who will be able to pay his rent and honour the terms of his lease;
   • agree with the tenant on the responsibility for paying bills for utilities such as electricity and heating;
   • relocate in a house or apartment corresponding to his or her budget.

   Beyond avoiding foreclosure, this solution provides some tax benefits. For example, it will be possible for the lessor to deduct from his or her revenues some expenses such as the maintenance costs of the house, the mortgage interests, etc. But, on the other hand, the rental income thus received will have to be added to the lessor’s annual revenues.

   The following links provide further information on the fiscal aspects of rental incomes:

   • Canada Revenue Agency
   • Revenu Québec

5. Sell the house rather than losing it

   Selling the house, albeit reluctantly, will generally be better than losing it. If there is equity in the home, and if the sale price allows you to pay off the mortgage in full, there could even still be a small residual amount of money left. Such a remaining sum could be used as a down payment on another home, or to reimburse other debts.

   Nevertheless, when selling a house, one must consider costs such as the realtor’s fees and the charges related to the certificate of location. It is also important to remember that the time interval between putting the house up for sale and the actual sale transaction remains rather unpredictable.

6. Meet a bankruptcy trustee

   Meeting with a bankruptcy trustee can be worthwhile if other debts compromise one’s capacity to make mortgage payments. Following a preliminary meeting, the trustee will try and determine if a consumer proposal or, as a last resort, filing for bankruptcy are potential solutions. In either case, it can be possible to keep the house. Whatever solution is chosen, it will then allow to eliminate a large proportion of the debts, and to allocate a greater part of the incomes to the mortgage payments.

   To benefit from a free consultation with a trustee and to determine whether a consumer proposal or filing for bankruptcy is an appropriate solution for you, make an appointment right away. Discretion assured.

Mortgage renewal

Some people have been denied, on the account of their financial hardship, the possibility to renew their mortgage when it expired. There are however temporary solutions for people who experience such difficulties.

To deal with similar situations, these people may call upon private mortgage lenders. This type of lender, specialized in short term loans, is an alternative to traditional financial institutions. Interest rates are indeed higher, but the owner of a house can benefit from such an alternative. Having a mortgage with a private lender for a short while can help home owners regain the financial institutions’ confidence.