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Mortgage

The purchase of a house is usually financed by a loan, which is secured with the house itself. This secured loan is called a mortgage (or hypothec).

How it works

If you can afford the house and the mortgage payments do not take up too much of your disposable income, a mortgage is a good debt to have because it allows you to have an asset which will generally increase in value with time.

The mortgage is usually repaid over a period of 15 to 25 years (maximum 30 years) and has very low interest rates (currently between 2.5% and 4%) because the house serves as a collateral for the loan.

Possible solutions

If you’re having financial problems, you may be able to keep the house under certain circumstances, if that is what you want to do. In fact, if your mortgage payments and taxes are up-to-date, the house is insured and if you’re not otherwise in default on your mortgage payments, by law, you are allowed to keep your house when filing a consumer proposal or even a bankruptcy, if the value of the house is not significantly higher than the amount owed on the mortgage.

As with all your assets, if you do not want to keep your house, either because you have not been able to sell it or you cannot afford it, in a consumer proposal or bankruptcy, you can give it back to the mortgage creditor without being responsible for the loss.

However, this option is not available if you are consolidating your debts.

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