Mortgage Defaults

Can you charge an increased rate of interest, late payment charges and default fees when a mortgage goes into arrears?

Mortgage Default Concerns

Increasingly, we see pumped up interest charges, arrears payments, late charges and so on included in mortgage terms. These are well and above the mortgagees’ incurred expenses associated with NSF charges.

Question:

Can you charge:

1) an increased rate of interest,

2) late payment charges, and

3) default fees,

when a mortgage goes into arrears?

Answer:

This matter went before the Ontario Court of Appeal for a determination, PARCEL v. Acquaviva (2015)

The answers by the Court were:

1. No,
2. No, and
3. No.

Any such charges would constitute a penalty and would be prevented by the Interest Act as a penalty. That provision applies to mortgages. So, once a promissory note is secured by way of a mortgage on title, any of these provisions would become “void”.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com