Ontario homeowners work hard to pay the monthly mortgage payments on their valued properties. The percentage of properties that go into default remains impressively low. Current statistics show that less than 2% of Ontario homeowners go into default. Despite these very low numbers, a few Ontario homeowners default on the terms of their mortgage loans.
Different conditions can fall under the broad term ‘default.’ Yes, a late or missed payment is the one that will be the most likely scenario. There are other areas that one can potentially run into problems and represent a form of default on a particular mortgage loan which includes:
- Insurance unpaid- if a borrower fails to make an insurance payment on the mortgage then this also represents a form of going into default.
- Not renewing the mortgage– If the borrower fails to renew the mortgage on time or fails to make insurance payments this is also a form of default.
- Letting property conditions go– the property must be well maintained and letting it go into disrepair can also be classified as a form of default.
- Taxes unpaid on the property– Any unpaid taxes represents going into default as well.
What Exactly is Power of Sale
In Ontario, the method overwhelmingly used to deal with mortgage loan default is Power of Sale. So what exactly is Power of Sale? The best way to describe this term is when one is taking the right to sell the property. The lender has been given the power to sell a home or property. In the event of Power of Sale, the homeowner still owns the home but the lender now has the legal right to sell it.
Any profit made on the sale of the property legally goes back to the property owner or borrower. The whole process can take as little as a few months (usually 6 months) at little cost to the lender. As a borrower, you will be subject to extremely high fees ranging up to 30,000 dollars in the power of sale proceedings.
Difference Between Foreclosure and Power of Sale
What is foreclosure then? Foreclosure differs from Power of Sale in several respects. The most significant difference between the method of Power of Sale and Foreclosure is that when a property goes into foreclosure the lender takes over ownership of the property. The lender is responsible for all potential gains on the property as well as all liabilities.
Foreclosure typically involves lengthy court proceedings to carry out and can be costly. When taking over ownership of the property the lender is entitled to keep any profits made but does not have the legal right to sue the borrower for any shortfalls.
Because the lender now has ownership over the property there is the obvious upside of retaining any profits made on the sale of the property but this is not without risk for the lender as now the lender is on the hook for any liabilities associated with that particular property.
So as you can see the most significant difference between the process of Power of Sale can be broadly defined by two major criteria:
1. The involvement of the courts.
If a lender is forced to start foreclosure proceedings (sometimes referred to as Judicial Sale) it must be done so through the courts. It becomes a legal process involving lawyers and the court’s approval. In other words, an application must be made with the courts to start the foreclosure process.
2. How the proceedings are initiated
The second major distinction to make between the process of foreclosure and power of sale in the realm of starting or initiating the proceedings. In the case of the power of sale, a notice of sale will be sent to the borrower informing them that the lender will be starting the power of sale process due to default. In the event of a foreclosure ( Judicial sale), the lender will have to apply to the court asking for permission for the court to start proceedings.
3. Time that each process takes
It stands to reason that because each process differs in that one involves the courts, and by extension lawyers, while the other does not, the time the process will take will differ considerably. The foreclosure process takes considerably more time because of having to make an application directly to the courts. With the process of the power of sale, your lender will not be required to go through the courts.
Ways to Stop a Power of Sale
Fortunately, there are ways to stop a power of sale. It is in your best interest to explore these options. Two of the options will more than likely require the services of a private lender. At Mortgage Broker Store we will help you sit down with the right lenders to help you try to stop an imminent power of sale on your property. Your choices boil down to essentially three options:
- Take Out a New Primary Mortgage ( First Mortgage)- In order to absorb the fees and cost that have incurred in the process of the power of sale and renegotiate terms to provide a manageable monthly payment moving forward, Taking out a new first mortgage on your property will be a good way to stop the power of sale.
- Take Out a Second Mortgage on Your Property– Sometimes taking out a second mortgage loan, depending on the equity built up on your property and location, is also a good option. A second mortgage will allow you to cover all the fees in the power of sale, any arrears owing your property, and manage the mortgage payments.
- Try to sell your property before the power of sale proceedings start– A third option open to Ontario homeowners facing imminent power of sale is to sell their property before the lender takes over the legal right to sell it. This will avoid paying enormous fees and losing profit in the sale of your property under the power of sale.
Getting a New Private Lender Mortgage- How Mortgage Broker Can Help
The options open to Ontario homeowners, when faced with the threat of the power of sale of their property due to default, will likely require the expert services of Ontario private lenders. If you are considering the options of taking out a second mortgage or a new primary mortgage to pay off your lender you will need to take out a private loan. These two loan options are deemed high-risk loans due to the mortgage going into default. Private lenders will be able to negotiate higher-risk loans even with poor credit.
The interest rates will be higher than those charged by major banks and fees will be higher, however, private lenders will lend you the funds on a short-term basis while the banks will deem these loans too high-risk to loan out.
Mortgage Broker Store Has a Network of Private Lenders
Mortgage Broker Store can help facilitate homeowners in their request to stop a power of sale process or those already in a power of sale. Let Mortgage Broker Store steer you in the right direction when contemplating your options.
With a network of lenders across Ontario and countrywide, we will work diligently to facilitate your mortgage needs moving forward. Please feel free to contact us with any further questions you may have.