Mortgage Debt Relief in Canada

How mortgage debt becomes a problem

Mortgage debt is the largest financial commitment most Canadians carry. As of August 2025, residential mortgage debt in Canada reached $2.3 trillion, up 4.8% from the year before.

Source: CMHC – Residential Mortgage Industry Report, Fall 2025

A mortgage is manageable when your income, interest rate, and other costs stay roughly where they were when you signed. The trouble starts when one of those shifts. For instance, people who locked in rates below 2% in 2020 and 2021 are now renewing at rates two to three times higher.

The Bank of Canada estimates that 60% of mortgage holders renewing in 2025 and 2026 will see their payments go up. For those on five-year fixed-rate terms, the average increase is 15% to 20% compared to December 2024 levels.

Source: Bank of Canada – Staff Analytical Note 2025-21

Warning signs your mortgage is becoming unmanageable

Mortgage stress does not appear overnight. You start by cutting back on things you can live without, then you fall behind on utility bills or car payments.

If you are using a credit card or line of credit to cover everyday expenses because the mortgage payment leaves you short, that is a warning sign. So is avoiding conversations about money or feeling anxious about every bill that comes in.

Many people prioritize keeping their mortgage payments up to date because losing the house feels like the worst outcome.

Everything else, credit cards, utilities, even groceries, gets pushed down the list. That works for a few months, but unsecured debt builds until the whole thing becomes unmanageable.

How mortgage default affects your credit and your home

Your credit report

Negative information from missed mortgage payments stays on your credit report for up to six years in most provinces.

Source: Financial Consumer Agency of Canada – Credit Report Information

That affects your ability to borrow. Lenders view a mortgage default as a serious risk indicator, which can lead to higher interest rates on future borrowing.

Power of sale and foreclosure

A mortgage is secured against your home. If you stop paying, the lender has the legal right to take possession of the property and sell it to recover what you owe. The process varies by province. In Ontario it is called power of sale. In provinces like British Columbia and Alberta, it is foreclosure.

Either way, you lose the home and remain responsible for any shortfall between the sale price and the amount owing, as well as the lender’s legal and selling costs. That shortfall becomes an unsecured debt.

What to do if you are struggling with mortgage payments

Talk to your lender early

Lenders do not want to take your home. Foreclosure is expensive for them, too. If you contact them before you miss a payment, they have options. They can extend your amortization period to reduce monthly payments, offer a temporary deferral, or adjust your payment schedule.

The FCAC released updated guidance in 2025 requiring lenders to contact borrowers facing hardship and offer payment relief options proactively. Use that to your advantage.

Source: Bank of Canada – Staff Analytical Note 2025-21

Deal with the debt around the mortgage

If your mortgage is current but other debts are falling behind, the issue is your total debt burden.

A consumer proposal lets you deal with unsecured debts, such as credit cards, personal loans, and lines of credit, by repaying a portion of the debt over a fixed period. Your creditors forgive the rest.

This frees up cash flow to keep the mortgage payments going. Your home is not affected by a consumer proposal because the mortgage is a secured debt handled separately.

Get professional advice

If you are unsure where you stand, talk to a Licensed Insolvency Trustee. The consultation is free, and you will get a clear picture of your options based on your actual numbers, not guesswork.

FAQ

How long does a mortgage default stay on my credit report?

Negative information from missed payments or default stays on your credit report for up to six years in most provinces. A foreclosure is recorded for six years from the filing date.

Source: Financial Consumer Agency of Canada – Credit Report Information

Can I keep my home if I file a consumer proposal?

Yes. A consumer proposal covers unsecured debts only. Your mortgage is a secured debt and is not included. As long as you keep up with your mortgage payments, you keep your home.

What is the difference between power of sale and foreclosure?

Power of sale, used mainly in Ontario, lets the lender sell the property without court approval.

Foreclosure, used in provinces such as British Columbia and Alberta, requires a court order and transfers ownership to the lender before the property is sold.

Both result in losing your home, but the legal process and timelines differ.

What happens if my home sells for less than I owe?

The shortfall between the sale price and your outstanding mortgage balance, plus the lender’s costs, becomes an unsecured debt. You are still responsible for it, and the lender or a collection agency can pursue you for payment.

If your mortgage payments are keeping you up at night, our Licensed Insolvency Trustees offer a free consultation. We will look at your full picture, explain what is realistic, and help you work out the best path forward.