Two missed mortgage payments is a problem you can still fix. Four is a different conversation.
Most Ontario homeowners who call me about arrears are convinced the bank is about to change the locks next week. It isn't. Under section 32 of Ontario's Mortgages Act your lender can't serve a Notice of Sale until the default has run 15 days, and once it is served you get a further 35 days minimum before the property can be sold. That is your runway. Short, but real.
The question I get inside that window is almost always the same one. Can I refinance my way out of this? Usually yes. Almost never with your current bank.
You are also not the only file on the pile. The Canadian Bankers Association counted 14,061 mortgages in arrears across the big banks in May 2026, out of 4.93 million outstanding. That is 0.29 percent nationally, up from 0.22 percent a year earlier. Ontario runs hotter at 0.32 percent, third in the country behind Saskatchewan and Manitoba. Alternative lenders read those same numbers, and they have built product for it.
Can You Refinance a Mortgage That's in Arrears?
Yes. In most cases you can refinance an Ontario mortgage that is in arrears, provided you have equity and some provable income. The arrears are rolled into the new mortgage and paid out on closing day, which clears the default. What changes is who is lending. Your bank won't. A B lender might. A private lender almost certainly will, at a price.
Equity is the whole ballgame here. At this stage lenders are not really underwriting you. They are underwriting the house.
Why Your Bank Says No and a B Lender Says Maybe
Banks are federally regulated and their credit policy is automated in ways that leave very little room for a story. A reported missed mortgage payment is close to an automatic decline at an A lender. The stress test compounds it, because you still have to qualify at 5.25 percent or your contract rate plus two percent, whichever is higher, on a payment that has already proven too big.
B lenders work differently. They look at the loan to value, the exit plan, and whether the thing that caused the arrears has ended. A layoff you have recovered from. A business quarter that went sideways. A separation. A pattern of missed payments running back two years is a much harder sell than one bad stretch, and frankly it should be.
Private lenders barely look at credit at all. They want equity, clean title, and a realistic plan to be gone inside a year or two.
How Much Equity Do You Need to Refinance With Arrears?
For a conventional refinance in Canada the ceiling is 80 percent of the property's value. That is not a lender preference you can negotiate around. Refinances cannot carry default insurance, so there is no mechanism to go above it on the A or B side.
Run the math on your own place before you call anybody. Take a realistic value, multiply by 0.80, then subtract your current mortgage balance, the arrears, your lender's legal costs so far, and roughly three percent for closing. Whatever is left is what you actually have to work with. If that number comes out negative, a refinance is not your answer, and the sooner you know it the more options you keep.
Private second mortgages can push past 80 percent, sometimes to 85 or 90 in the right postal code. They cost accordingly.
What Does It Cost to Refinance Out of Arrears in Ontario?
More than a normal refinance. A great deal less than losing the house. Pricing moves with the market and with the file, so treat the ranges below as the shape of the deal rather than a quote:
| Cost | Typical range |
|---|---|
| B lender rate, versus an A lender | 1 to 2 percent higher |
| Private first or second mortgage rate | Well into double digits |
| Lender fee | 1 to 3 percent of the loan |
| Broker fee on private deals | 1 to 2 percent, disclosed in writing |
| Legal | $1,500 to $2,500 |
| Appraisal | $400 to $700 |
| Your lender's enforcement costs, added to payout | Varies, and climbs weekly |
Those fees come off the advance, so you never write a cheque. You just borrow more. That is the trade, and I would rather say it plainly than dress it up.
Pull your own Equifax and TransUnion reports. They are free, and checking your own file does not affect your score. You need to know whether the arrears have been reported yet and at what R code, because that one detail decides whether a B lender or a private lender is the realistic call.
What Mortgage Arrears Do to Your Credit Report
Every trade line on a Canadian credit report carries an R code. R1 means paid as agreed. R2 is 31 to 60 days past due, R3 is 61 to 90, R4 is 91 to 120, and R5 is beyond 120 days. R9 is the bottom of the scale: written off, placed for collection, or included in a bankruptcy.
An R code on a mortgage does more damage than the same code on a credit card, because lenders read a mortgage as the debt you protect first. R2 on a Visa reads as disorganised. R2 on a mortgage reads as stretched.
Here is the part people get wrong. Refinancing out of arrears does not erase the R codes already reported. It stops new ones landing. That is still the most valuable thing you can do this month, because the damage is a function of how long the default runs, not just that it happened.
Refinancing out of arrears doesn't erase what's already reported. It stops the bleeding. That's worth more than it sounds.
How Long Do Mortgage Arrears Stay on Your Credit Report in Canada?
Six years in Ontario. Missed payments and collections fall off an Ontario credit report about six years after the date of last activity, and neither bureau removes them early because the debt got paid. Paying stops the clock from restarting. It does not reset it.
A few items run longer. TransUnion holds judgments and bankruptcies for seven years in Ontario where Equifax holds them for six. A consumer proposal clears three years after payoff or six years from signing, whichever comes first.
Six years sounds like a sentence. It isn't, and this is the piece worth understanding: lenders weight recent history far more heavily than old history. Two clean years after a bad stretch changes your options substantially, even with the old R codes still sitting there in plain sight.
Getting Back to an A Lender After Arrears
The realistic path is 12 to 24 months on a B or private mortgage, then a move back. Not five years. Not never.
What has to happen in that window is unglamorous. Every payment on time, on everything, set to automatic withdrawal so it stops being a monthly decision. Balances held under 30 percent of their limits. No new credit applications you don't genuinely need. And if income was the underlying problem rather than a one-off event, that has to get fixed too, because no lender is refinancing you into the same squeeze twice.
Exit planning starts on day one, not month eighteen. A private mortgage with no exit is how a twelve month fix becomes a four year one. I build the exit into the file before the first deal funds, and if a broker isn't talking to you about the exit, treat that as a flag.
If your file went further than arrears, into a completed power of sale or a bankruptcy, the timelines stretch but the method is identical. There is more detail in my guide to getting a mortgage after bankruptcy in Ontario, and in the one on bad credit mortgages if that is closer to where you are standing.
When Refinancing Is the Wrong Move
Sometimes it is. I would rather say so in the first conversation than three months into a mortgage you cannot carry.
If the new payment eats more of your income than the old one you already couldn't manage, the refinance has bought time and nothing else. If your equity after costs is thin, you are spending most of it on fees to hold a house you will probably sell anyway. And if the arrears are a symptom of an income change that has not reversed, borrowing against the house is treatment aimed at the wrong thing.
Selling on your own terms, with your own agent and your own timeline, almost always nets more than a lender's sale does. If a Notice of Sale has already been served the options narrow and the clock starts to matter more, which I have covered in detail in how to stop a power of sale in Ontario.
What to Do This Week
Call your lender and ask for a reinstatement figure in writing. Not a ballpark over the phone. The written number tells you exactly what it costs to bring the mortgage current today, and every other decision gets measured against it.
Then pull both credit reports and check whether the arrears are showing yet, and at what R code. Then get a realistic value on the property. Not an online estimate, and not what your neighbour got in 2022.
With those three numbers a mortgage agent can tell you in one conversation whether a refinance works, what it would cost, and whether it is the right call at all. Without them, anyone giving you an answer is guessing.
Behind on payments and not sure what's left?
Send me the reinstatement number and the mortgage balance. I'll tell you straight whether a refinance clears it, what it would cost, and when selling is the smarter call. No charge, and no pressure to borrow.
Book a Discovery CallFrequently Asked Questions
Can I refinance if I'm two payments behind on my mortgage in Ontario?
Usually yes, through a B lender or a private lender rather than a bank. The arrears are added to the new mortgage and paid out at closing, which clears the default. You need enough equity to stay within 80 percent of the property's value on a conventional refinance, and some provable income to carry the new payment.
Will refinancing remove the missed payments from my credit report?
No. The R codes already reported stay on your file for about six years in Ontario. What a refinance does is stop new missed payments from being reported, which matters more than most people expect, because lenders weight the last two years far more heavily than older history.
How long do mortgage arrears stay on your credit report in Canada?
Roughly six years from the date of last activity in Ontario. Paying the arrears does not remove the entry early. TransUnion keeps judgments and bankruptcies for seven years in Ontario, where Equifax keeps them for six, and a consumer proposal clears three years after payoff or six years from signing, whichever comes first.
Can I still refinance after a Notice of Sale has been served?
Yes, right up until the property is actually sold. It costs more at that point because the lender's legal fees and accrued interest are added to the payout, and it gets harder every week you wait. If a Notice of Sale has landed, move immediately rather than shopping around for a better rate.
Do I need good credit to refinance mortgage arrears in Ontario?
Not for a private mortgage, where equity and clean title do most of the work. B lenders will look at credit but weigh it against the loan to value and the reason behind the arrears. A lenders will decline almost automatically once a missed mortgage payment is reported, which is why this is not a bank conversation.
How soon can I get back to a regular bank mortgage?
Twelve to twenty-four months is the realistic range, assuming every payment lands on time from here and your income supports the file. The exit should be planned before the rescue mortgage funds, not once its term is nearly up.
The Bottom Line
Arrears are not the end of your mortgage. They are the end of your bank's interest in your mortgage, which is a much smaller problem and a very different one.
What decides the outcome is equity, timing, and whether you act before the lender's costs start compounding. Get the reinstatement number in writing. Pull your credit. Know your real value. Then decide, with actual figures in front of you, whether you are refinancing out of this or selling on your own terms.
Either way, you have more room than the letter from the bank makes it sound.