The rise in interest rates hit hard in the last year, when the number of notices for exercising mortgage rights was 47.2% higher in January 2024 than in January 2023. This means that Quebecers are more likely to have received the final warning before their property is subject to financial repossession. Here’s what you need to know about this last resort procedure.
What is a financial recovery?
When you take out a mortgage, you agree that the loan is guaranteed by the property itself. Thus, if you find yourself in default of payment, the financial institution which holds the mortgage has the right to repossess the house and resell it. Other reasons can also lead to a repossession, such as not paying your property taxes, or letting a property deteriorate.
How it works
In most cases, the bank does not become the owner of the house and instead opts for a sale under judicial supervision. The money from the sale is then used to pay the mortgage loan and in the event of a surplus, sums are given to the customer. It may nevertheless be advantageous for the financial institution to become the owner of the house if the balance of mortgage debts is lower than the value of the property, but this scenario is less common.
To avoid getting there
A financial recovery is, however, a solution of last resort, as explained by Rola Azouri, the senior director of the subprime loan management service at the National Bank of Canada.
- Listen to the interview with Yanic Parent, real estate broker, via QUB :
“It’s really the last thing the bank wants,” she says. So we are in regular contact with our customers who have financial difficulties and who are struggling to meet their obligations.”
Various solutions are then considered, and depending on the case, the financial institution may propose to postpone the payment of debt consolidations, capital holidays, and sometimes even extensions of amortization.
“It’s not automatic, it’s really on a case-by-case basis,” explains M.me Azouri.
Acts of financial difficulty in figures
- 471: This is the number of exercise notices, the final warning before a financial recovery, in Quebec in January 2024.
- During this same period, there were 11 seizures, 15 fewer than in January 2023.
- There were also 11 bankruptcies in the first month of the year, 2 more than the same date last year.
*Source: Government of Quebec, real estate market statistics