Question: I have had my condo up for sale/rent for several months, with no luck. I am now living in a different city and paying double housing costs. Even if I do sell this condo for the asking price I will owe a significant shortfall on my mortgage as I did not pay any down payment and what I have paid off has merely been paying the interest. I can’t keep this up. I also have other debts.
What happens if I just turn in the keys to the lender?
You can include the unsecured shortfall for your mortgage arrears in a personal bankruptcy.
This is a very common question given the up and down real estate market across Ontario. If you simply stop paying the mortgage and surrender the keys to the mortgage holder, the lender will eventually foreclose on the property and sell it. They will then pursue you for the shortfall. The shortfall could be large, because in addition to the outstanding amount on the mortgage they will add in their legal costs, outstanding condo fees and property taxes, and other costs. If you can pay them, that’s your best option.
However, since you also have other debts as well, you should review all of your debts, including the mortgage shortfall, and determine if a more formal solution is required.
For example, a consumer proposal may be an option. You could make a deal with all of your creditors to release you from all of your debts.
Filing bankruptcy is also an option, but you should consult a trustee to review the process for surrendering the house, and the implications of filing bankruptcy, to determine if that is the correct answer in your situation.