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Purchasing property in the US I always knew that if the worst would happen and I defaulted on my mortgage, the bank would take the keys and assume ownership of the property and then sell it to minimize their loss.

Now living in Canada I was told that all mortgages are recourse loans (and the US mortgage is a non-recourse loan) which means after the bank takes the house and sells it, if they can't recoup the loss they can come after my assets and income.

Is there truth to Canadian mortgages being recourse loans? Are all of them that way? If not how can I tell? I've read the fine print and don't encounter that specific term or language of that nature.

  • There should be a clause in your mortgage contract that states what happens in case of default. If you cannot find it consult with the lawyer who handled it for you. Here(NZ) mortgage contracts tend to try and preempt every liability the bank can think of. – BevynQ Feb 19 '16 at 7:00
  • Just to be clear: Recourse loans hold the borrower personally liable, which means that the bank can collect on the difference from you after the collateral (house) is sold. Non-Recourse means that the bank can take the collateral, but nothing more. Most mortgages in the U.S. are recourse. – Ben Miller - Reinstate Monica Feb 19 '16 at 14:00
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Mortgages are typically recourse loans everywhere in Canada other than Alberta and Saskatchewan. Note that you must have a mortgage without mortgage default insurance, otherwise it is still a recourse loan.

You are required to get mortgage default insurance when taking out the mortgage, unless you put down at least 20% on your downpayment. You can subsequently remove the insurance once you pass that threshold. These requirements make it much less likely, though obviously not impossible, for your mortgage to be underwater.

Note that walking away from your no-recourse mortgage will still result in a hit on your credit rating, at least in Alberta. This may make it harder or impossible to get loans for the next few years.

I believe you live in BC, based on your profile. Typically, all mortgages in BC would be recourse mortgages.

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