Financial challenges causing mortgage arrears in Ontario can lead to imminent Power of Sale for homeowners. Numerous lending options exist for Ontario homeowners seeking second mortgages or borrowers seeking their first mortgage. There are ways to stop the Power of Sale on an Ontario property. Lenders aim to avoid Power of Sale; Ontario homeowners should strive to prevent it and protect their homes.
Understanding Power of Sale
In Ontario, both traditional and private lenders have processes to recover mortgage funds if payments are missed. Lenders utilize two methods to handle mortgage default. Foreclosure and Power of Sale. In Ontario, Power of Sale is the most utilized method lenders will use when a property goes into default.
What is Power of Sale? In this default process, the lender takes the right to sell the property. The lender possesses the authority to sell a home or property. In Power of Sale, the homeowner retains ownership, yet the lender gains the legal right to sell the house.
The homeowner defaults once a property owner falls behind in monthly mortgage payments or fails to meet other mortgage terms. The consequences of default can lead to legal actions such as foreclosure or Power of Sale proceedings.
Power of Sale – What Does It Involve?
A lender can now legally possess and sell the property, following distinct steps in Power of Sale. A lender must:
- Allow for 15 days – Once a borrower has fallen into arrears, the Ontario Mortgage Act requires that the lender allows 15 days for the borrower to try to rectify the situation before the lender—traditional or private— can exercise the Power of Sale.
- Send a Notice of Sale to Borrower – After 15 days without rectification, the lender can notify the homeowner. This is an official Notice of Sale, signalling borrower default and providing a redemption period for rectification.
- Lender Will Issue a Statement of Claim – If the borrower does not pay what is due by the redemption period, the lender has the legal right to issue a Statement of Claim to address the debt owed and take possession of the property.
- Lender Can Apply to Take Possession of the Property – After the Statement of Claim has been issued. If the borrower fails to pay the mortgage or fees, the lender may seek court permission for possession and eviction. The current owners must leave by the specified date or face forcible removal by authorities.
- Take Steps to Sell the Property – In the final step of the Power of Sale, the lender can possess and sell the property in its current condition. The previous owner is responsible for substantial fees, reducing profits significantly in Power of Sale.
Ways to Stop Power of Sale
Ontario homeowners must understand that the Power of Sale process is time-consuming and demands patience. Power of Sale typically takes about 6 months from notice to lender property possession. This time is very valuable. It allows for several options to try to stop the Power of Sale, including:
- Attempt to sell the house before the lender takes final possession – There are buyers in Ontario who can buy your property in its current state. Evaluating your property’s current appraisal and local comparables confirms it’s available for purchase at market value with a discount. Preventing exorbitant costs of Power of Sale, up to $30,000, and avoiding renovation expenses as the property sells as-is.
- Obtain a second mortgage on your property – By taking out an additional mortgage on your current property, a property owner will have access to funds to pay off any arrears and cover the monthly mortgage payments comfortably. Most second mortgages are offered by alternative lenders and not banks. To avoid Power of Sale, tap into home equity. It gains control, prevents complications, and improves credit with timely payments.
- Take out a new primary mortgage– There is also the possibility of taking out a new mortgage to replace the current mortgage that may be in default. Well-established private lenders throughout Ontario will assess Loan-To-Value (LTV) on your property by evaluating a recent assessment. Private lenders offer up to 75% LTV of the property’s value, needing more than 25% equity. First or second mortgages can halt an impending Power of Sale. The loan-to-value (LTV) ratio is the most important factor for a private lender. The LTV ratio is the percentage of the property’s value owed in mortgages. Calculate this ratio by taking all existing mortgages plus all proposed mortgages and dividing by the appraisal value.
Mortgage Broker Store Can Help Stop a Power of Sale on Your Home
Mortgage Broker Store is well experienced and has specialized knowledge in the Power of Sale process as well as methods to stop a Power of Sale. Our network of private lenders can help clear arrears and legal fees and preserve your home’s value through financing options.