What Is a Power of Sale and How Does It Work?

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 most likely scenario. There are other areas in which one can potentially run into problems and represent a form of default on a particular mortgage loan, which includes:

• Unpaid Insurance: Failing to make an insurance payment on the mortgage is a form of default.
• Failure to Renew the Mortgage: Not renewing the mortgage on time or missing insurance payments is considered default.
• Neglecting Property Maintenance: The property must be well-maintained. Letting it fall into disrepair can also be classified as a default.
• Unpaid Property Taxes: Any unpaid taxes represent a 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 six months) at little cost to the lender. As a borrower, you will be subject to extremely high fees ranging up to $30,000 in the Power of Sale proceedings.

Difference Between Foreclosure and Power of Sale

Foreclosure differs from Power of Sale in several respects. The most significant difference is that in foreclosure, the lender takes over ownership of the property. The lender is responsible for all potential gains and liabilities on the property.

Foreclosure typically involves lengthy court proceedings 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 three major criteria.

The Three Major Criteria of Power of Sale

1. Involvement of the Courts: Foreclosure (sometimes referred to as Judicial Sale) must be conducted through the courts, involving legal proceedings and court approval. Power of Sale does not require court involvement.
2. Initiation of Proceedings: For Power of Sale, the lender sends a notice to the borrower to initiate the process due to default. In foreclosure, the lender must seek court permission to start proceedings.
3. Duration: Foreclosure takes considerably more time due to the court process. Power of Sale is quicker since it does not involve 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 costs that have been 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 covers Power of Sale fees, arrears, and mortgage payments, providing financial relief for homeowners.

• Try to Sell Your Property Before the Power of Sale Proceedings Starts: 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. To pay off your lender with a second or new primary mortgage, consider taking out a private loan. These two loan options are deemed high-risk loans due to the mortgage defaulting. Private lenders will be able to negotiate higher-risk loans even with poor credit.

Private lenders offer short-term loans with higher interest rates and fees, unlike banks, which consider them high-risk.

Mortgage Broker Store has a Network of Private Lenders

Mortgage Broker Store helps homeowners stop Power of Sale or those already in it. Get assistance now. 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. Call 416-499-2122 or email ron@mortgagebrokerstore.com to start your journey toward financial solutions today!