Arrears

Arrears describes mortgage payments that are past due — money a borrower owes on the mortgage but has not paid by the scheduled due date. An account stays in arrears until the overdue amount, plus any associated interest, is brought up to date or the lender and borrower agree on another arrangement.

How a mortgage falls into arrears

Most Canadian mortgages are paid on a fixed schedule, whether monthly, bi-weekly, or weekly, and a payment becomes overdue the day after its due date. Typical triggers include a job loss, an illness, a separation, a jump in variable-rate payments, or a timing gap between a paycheque and the pre-authorized withdrawal date. A returned payment for insufficient funds usually puts the account in arrears too.

Arrears is not the same thing as default, although arrears can lead there. Arrears is a factual state — an amount owing. Default is the contractual event a lender declares when the mortgage terms are breached, which opens the door to enforcement.

What happens when payments are overdue

• The lender typically sends a reminder, then a formal notice, and may charge a fee for a failed payment.
• Missed payments are reported to the credit bureaus and can affect a credit score.
• Interest generally continues to accrue on the overdue amount and on the remaining balance.
• If the account stays in arrears, the lender may declare default and begin power of sale or foreclosure proceedings, following the rules of the province where the property sits.

Federally regulated lenders operate under OSFI's Guideline B-20, and mortgage default insurers such as CMHC, Sagen, and Canada Guaranty expect lenders to maintain clear arrears-management and collection policies.

Arrears versus “paid in arrears”

The word appears in a second, unrelated sense. Mortgage interest is commonly calculated in arrears, meaning interest for a period is charged after that period has passed. That is a routine timing convention and has nothing to do with a missed payment. When a lender says an account is “in arrears,” it means money is overdue.

Why it matters

Arrears is easier to resolve early. Contacting the lender before a payment is missed, or as soon as one is, keeps options open — a temporary payment deferral, a changed payment date, or an amendment to the mortgage. Ignoring notices narrows those options and lengthens the time the arrears sit on the credit report. See what to do if you can't make a mortgage payment for practical steps, or use the mortgage payment calculator to check whether a different payment frequency fits your cash flow.