Falling behind on a mortgage is more common than people admit. A job change, a health problem, a separation, or a renewal at a much higher rate can knock a budget sideways. If you own a home in Charlottetown and you have missed a payment, or you can see one coming, the worst thing you can do is wait. Here is what to do, roughly in order.
Step 1: Figure out exactly where you stand
Gather your mortgage statement and any letters from your lender. Write down how many payments you have missed, the total arrears, whether any fees have been added, and when your term ends. If you have a second mortgage or a home equity line of credit, include those too.
Then look at the month ahead. If the cause is temporary, such as a gap between jobs, you may be able to catch up. If it is ongoing, such as a permanent drop in income, catching up may only delay the problem.
Step 2: Call your lender now
It feels backwards, but your lender usually does not want your house. Enforcement is slow and costly for them too. Call, explain what has happened, and ask what they can offer. Depending on your lender and your mortgage, options might include:
- A repayment plan that spreads the arrears over several months
- A short payment deferral
- Extending the amortization to lower your payment
- Capitalizing the arrears, which adds them to your balance
Get any arrangement in writing, and make sure you can actually keep it. Breaking a repayment plan can leave you worse off than before.
Step 3: Understand how PEI lenders enforce a mortgage
Knowing what could happen next helps you decide how fast to act. Standard mortgage terms commonly let the lender demand the full balance once you are in default, not just the missed payments. Standard PEI mortgage terms also typically include a power of sale, which allows the lender to sell the property without going to court once the required notices have been given. Lenders can also take the court route through the Supreme Court of Prince Edward Island, asking for foreclosure or a court-ordered sale.
Either way, if the property sells for less than you owe plus the lender’s costs, you can still be pursued for the shortfall. The exact steps and notice periods depend on your mortgage terms, so a real estate lawyer is the right person to read your documents and tell you where you stand.
Step 4: Get help with the rest of your debts
If credit cards, car loans or a line of credit are part of the squeeze, talk to a non-profit credit counselling service or a licensed insolvency trustee. Many offer a free first meeting. They can show you options you may not know about, and help you decide whether keeping the house is realistic.
Step 5: Decide whether to keep the house or sell
Ask yourself honestly:
- Can I make the full regular payment plus something toward the arrears every month?
- Is the problem temporary, with a clear end date?
- Will my mortgage renewal make payments go up again?
- Does the house need major repairs I cannot pay for?
If the answers point toward trouble, selling while you still have equity is usually better than waiting for the lender to sell for you. A sale on your own terms pays out the mortgage, stops fees and interest from piling up, and leaves whatever equity remains with you rather than eaten up by enforcement costs.
Selling a house in Charlottetown on a deadline
Charlottetown is the Island’s capital and largest city, with about 38,800 people in 2021 and more than 83,000 in the surrounding area. Its economy is anchored by the public sector, health care and education, including UPEI and Holland College. The city took its current shape through amalgamation in the mid-1990s, and its neighbourhoods range from downtown, Brighton and Spring Park to Sherwood, Parkdale, West Royalty and East Royalty.
A traditional listing can work if you have time, but when arrears are growing, every month on the market adds interest and fees. You may also need repairs or cleaning before listing, and a buyer’s financing condition can fall through late. If the lender has already sent a demand, you may not have the time a listing needs.
A direct sale gives you certainty. You agree on a price for the house as-is, you choose the closing date, and your lawyer pays out the lender from the proceeds. When title is clear, that can happen in as little as a couple of weeks.
What not to do
- Do not ignore letters from your lender or their lawyer.
- Do not borrow at high interest to make one more payment unless you have a real plan for the next one.
- Do not sign over your house or pay an upfront fee to anyone promising to “save” it. Get advice from a lawyer first.
- Do not move out and stop paying the insurance. An uninsured property is a much bigger problem.
How East Coast Home Buyers can help
We buy houses in Charlottetown and across PEI in as-is condition. If you are behind on payments, we can give you a clear cash offer quickly, so you can compare it to a repayment plan or a listing and make the choice that leaves you in the best shape. Our Charlottetown page has more on how we work.
When you are ready, get your cash offer. It is free, and you are under no obligation.
Frequently asked questions
How many missed payments before my PEI lender can act?
It depends on your mortgage terms. Many mortgages allow the lender to demand the full balance once you are in default. Read your mortgage documents and have a lawyer explain the notice requirements that apply to you.
Does PEI use foreclosure or power of sale?
Both are possible. Standard PEI mortgages typically include a power of sale that lets the lender sell without a court order after giving notice, and lenders can also go to the Supreme Court of PEI for foreclosure or a court-ordered sale.
Can I still sell if my lender has sent a demand letter?
Usually yes, as long as the property has not already been sold by the lender. Move quickly and let your lender know you are selling.
Will selling stop the late fees and interest?
Once the sale closes and the mortgage is paid out from the proceeds, interest and fees stop. Until then they keep adding up, which is why timing matters.