What to do if you cannot pay your mortgage?
Mortgage default is one of the most stressful financial situations a homeowner can face. In Calgary, as in all of Alberta, the foreclosure process has clearly defined stages, but the most important rule is to act as quickly as possible after the first missed payment.
Statistics show that homeowners who seek help after the first missed payment have significantly more options to resolve the situation.
According to Equifax Canada, the number of missed mortgage payments increased significantly in the fourth quarter of 2024 compared to the previous year. This is especially true for homeowners who took out mortgages during the pandemic at historically low rates and are now facing the mortgage renewal wall.
The Canada Mortgage and Housing Corporation estimates that homeowners renewing their mortgages in 2025 could face a 30–40% increase in their monthly payments.
Understanding the nature of financial difficulties
It is important to distinguish between temporary financial difficulties and long-term problems:
- Temporary problems may include:
- job loss;
- illness;
- unexpected expenses.
- Long-term problems often require drastic changes in financial strategy.
Understanding the nature of your difficulties will help you choose the most effective plan of action.
Immediate steps to take when you miss a payment
1. Contact your lender
The first step should be to contact your lender immediately. Don't wait for them to call or write — take the initiative.
Federally regulated financial institutions are required to assist customers who are experiencing financial difficulties due to exceptional circumstances. These circumstances may include:
- high levels of household debt;
- rising cost of living;
- rapid increase in interest rates.
Information to prepare:
- a detailed explanation of the reasons for your financial difficulties;
- a realistic estimate of how long it will take to resolve the problem;
- your current financial situation (income, expenses, assets);
- suggestions for a temporary solution to the situation.
2. Document your financial situation
Prepare a detailed analysis of your financial situation, which should include:
- a list of all income;
- regular expenses;
- existing debts;
- assets.
This analysis will help you in your conversation with the lender and give you a clear understanding of the options available.
Tip: Calgary Police Credit Union and other local lenders are often more flexible when working with customers who proactively seek help. They may offer customized solutions that large banks do not typically consider.
Payment deferral and restructuring options
Mortgage payment deferral
Mortgage payment deferral is a temporary agreement with your lender that allows you to suspend your regular payments for a certain period of time.
⚠️ Important: Deferral is not debt forgiveness — all missed payments will have to be paid later with additional interest.
Mortgage payment assistance and deferral options in Calgary
Typical deferral terms
Homeowners in Calgary who are experiencing financial difficulties may be eligible for a mortgage payment deferral. The most common terms are:
- Term: 3 to 6 months.
- Interest capitalization: missed interest is added to the principal amount of the debt.
- Increase in monthly payments: after the deferral period ends, monthly payments may increase.
- Proof of financial hardship: proof must be provided.
Trigger rate and negative amortization
For holders of fixed-rate mortgages, it is important to understand the concept of a “trigger rate.” If the interest rate reaches a level where your payment only covers the interest, negative amortization occurs — the total debt actually increases.
Modification of mortgage terms
Lenders may agree to change the terms of an existing mortgage to reduce the financial burden. The most common options are:
1. Extending the amortization period
- Extending the term from 25 to 30 years can reduce monthly payments by $200–400 for a typical mortgage.
- Disadvantage: more interest is paid over the life of the loan.
2. Convert from a fixed to a variable rate
- If variable rates are lower than your current fixed rate, converting may reduce your payments.
- Current variable rates in Calgary: ≈ 4.55%.
3. Partial payments
- Some lenders will temporarily accept partial payments if you have a plan to return to full payments.
Assistance programs for homeowners
1. Sagen Homeowner Assistance Program (HOAP)
Sagen offers HOAP for homeowners experiencing short-term financial hardship. The program works with lenders to assess each situation individually.
Program options:
- Deferring payments to a later date.
- Extending the amortization period.
- Partial or shared payment plans.
- Other solutions tailored to specific circumstances.
The HOAP team of analysts works directly with lenders to help homeowners weather unexpected hardships and return to financial stability.
2. Programs for indigenous peoples
Métis Urban Housing offers a mortgage assistance program for citizens of the Otipemisiwak Métis Government. The goal of the program is to prevent foreclosure.
Eligibility:
- Up to $5,000 in assistance to cover mortgage debt.
- Citizenship of the Otipemisiwak Métis Government in Alberta.
- The property is your primary residence.
- Proof of financial hardship must be provided.
- A letter from your bank stating that your property is at risk of foreclosure is required.
3. Calgary City Programs
The Property Tax Assistance Program from the City of Calgary helps homeowners who are experiencing financial hardship. While the program does not cover mortgage payments, it can reduce financial pressure by helping with property taxes.
Eligibility:
- Loan or grant to cover tax increases.
- Owner must meet income criteria.
- Requirement: single property in Calgary.
Refinancing and debt consolidation
Mortgage refinancing
Refinancing can be an effective solution for homeowners with sufficient equity in their property.
- In Calgary, you can access 80% of the appraised value of your home.
- This allows you to consolidate high-interest debt into one low-interest payment.
Hello Mortgage Calgary specializes in this approach. Their clients often save hundreds or even thousands of dollars each month by combining credit cards, personal loans, and car loans into a single mortgage with a lower rate.
Benefits of refinancing:
- Lower monthly payments through consolidation.
- Increased monthly cash flow.
- One payment instead of several — less financial stress.
- Opportunity to improve your credit score through timely payments.
Private lenders and credit counseling programs in Calgary
Private lenders as an alternative
If traditional banks deny refinancing, private lenders in Alberta can provide alternative solutions. Private lenders focus on equity in real estate rather than credit scores, making them accessible even to homeowners with troubled credit histories.
Advantages of private lenders
- Fast approval (2–5 days)
- Flexible eligibility criteria
- Ability to stop the foreclosure process
- Interest-only payment options
Example: Lend Today reports a successful case in Lethbridge where a private lender offered interest-only payments for 12 months to a client who was facing financial difficulties due to a medical emergency.
Non-profit credit counseling programs
Credit Counselling Society Calgary
Credit Counselling Society is a leading non-profit credit counselling organization in Calgary. 98% of clients recommend their services. The organization offers free consultations and helps create debt management plans.
Services include:
- Free credit counselling
- Consolidation of debts into one affordable payment
- Stopping calls from collectors
- Saving thousands of dollars in interest
Consolidated Credit Calgary
Consolidated Credit Calgary offers a Debt Management Program (DMP) that significantly reduces financial burdens.
Example: Client Dan from Calgary saved $42,277 in interest and reduced his debt repayment period from 15 years to 3 years and 9 months.
Program results:
- Reduced average rate on high credit cards to 2.63%
- Reduced monthly payments from $3,034 → $1,754
- Saved $1,280 per month
Credit Canada
Credit Canada offers comprehensive credit counseling services in Calgary. Unlike consolidation loans, there is no need to borrow additional funds. It is an agreement between you, your creditors, and Credit Canada that helps provide debt relief.
Understanding the collection process in Alberta
Stages of the collection process
The collection process in Alberta can take anywhere from a few months to over a year. Understanding the stages will help you plan your next steps:
- After the first missed payment — the creditor begins making phone calls.
- After 2 missed payments — a lawyer sends a demand letter with the amount owed and a payment deadline.
- If the demand is ignored — the creditor files a Statement of Claim with the court. You have 20 days to respond.
- Redemption period — the court may grant up to 6 months to pay the debt and expenses.
Legal consequences and costs
All costs of the collection process are paid by the borrower:
- Legal services
- Appraisers and realtors
- Property management
- Repairs and preparation for sale
Important: The creditor may seek a deficiency judgment. This means that even after the property is sold, you may still owe the creditor if the proceeds are insufficient.
Alternative strategies and solutions
Selling the property
If your financial problems are long-term, voluntary sale may be a better option than foreclosure. In 2025, the Calgary market is showing increased inventory, which creates favorable conditions for buyers but may make quick sales more difficult.
Advantages of voluntary sale
Key advantages
- Control over the process and timing
- Opportunity to get a better price
- Avoidance of additional legal costs
- Preservation of credit rating
Renting out part of your property
If you have extra space, consider renting out part of your home. MCAN Home specializes in alternative income programs where money from roommates is considered applicant income.
Using your RRSP
Under the Home Buyers' Plan, you can withdraw funds from your RRSP to purchase a home, but there are also financial hardship programs available. Financial Hardship Unlocking allows you to withdraw funds from your LIRA due to the threat of foreclosure on your primary residence.
Long-term financial planning
Budgeting and financial management
Once the immediate crisis has been resolved, it is important to create a sustainable financial strategy. ATB Financial recommends automatically transferring the difference between your current lower payment and your potential higher payment into a special savings account.
This strategy helps you:
- Prepare for higher payments when they resume
- Create a fund for unexpected repairs
- Gain peace of mind about your ability to handle higher payments
Credit repair
If your credit score has been affected by missed payments, it is important to start the recovery process as soon as possible. Consolidated Credit and other organizations can teach you:
- How to improve your credit score
- How to manage your budget
- How to increase your savings
Special resources for different groups
Families with children
Calgary has special support programs for families. The Property Tax Assistance Program can help reduce your tax burden, freeing up funds for mortgage payments.
Seniors and retirees
Home Equity Bank offers special solutions for retirees, including reverse mortgages. One of the main advantages is no need to make regular payments, which can provide important relief during times of financial stress.
Newcomers and immigrants
Newcomers may have access to special support programs through immigrant organizations. While there may be fewer direct mortgage programs, there are resources to navigate the Canadian financial system and get support during difficult times.
Practical tips and recommendations
Preparing to talk to your lender
Before contacting your lender, prepare:
- A detailed explanation of the reasons for your financial difficulties
- A realistic plan to resume payments
- Proof of income and expenses
- Suggestions for temporary solutions
Document all communications
Keep detailed records of all conversations with creditors, including:
- Dates
- Names of representatives
- Agreements reached
This can be critical if the situation becomes more complicated.
Avoid fraudulent schemes
Be wary of companies that promise “easy solutions” or require large upfront payments. The best solutions usually come from:
- Non-profit organizations
- Regulated lenders
- Licensed professionals
Conclusion
Failing to pay your mortgage in Calgary does not mean you will inevitably lose your home. There are a wide range of programs, strategies, and resources available to homeowners experiencing financial difficulties.
The key to success:
- Act quickly
- Communicate proactively with your lenders
- Be willing to explore all available options
Tip: The sooner you seek help, the better your chances of keeping your home and maintaining financial stability.