Taking out a mortgage is a financial obligation that is taken very seriously by Ontario homeowners. In Ontario, it is still very uncommon for a borrower to default on his/her mortgage. Statistically, less than 2% of mortgages go into default. Most Ontario homeowners will do everything financially to be able to make monthly mortgage payments to avoid the default of their mortgage loan. This holds for the principal (first mortgages), as well as any second or third mortgages that may subsequently have been taken out on a given property.
Despite the very low probability of default, some processes are in place for traditional and private lenders to recoup their mortgages if a borrower falls behind on payments. There are two recognized methods for lenders to take when dealing with mortgage default. Foreclosure and Power of Sale. Let’s look at the process of the power of sale. In Ontario, power of sale is by far the most utilized method lenders will use when a property goes into default.
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.
What Are The 5 Common Myths of a Power of Sale
Homeowners in Ontario may hold some misconceptions surrounding the process of the power of sale. Let’s look at some of them:
- The Process is always final– This is not always the case. The terms surrounding the power of sale with a given mortgage contract comes down to what is written in the contract and agreed upon by both borrower and lender. This is why it is important to have a lawyer look over all clauses written into the mortgage contract about default.The borrower does have room to reverse a possible power of sale as steps are put in place allowing for a redemption period to put the account in good standing.
- A Power of Sale is a Quick Process- The process of the power of sale does take time. There are steps to follow and a mortgage contract is a legal document so all necessary paperwork needs to be dealt with. It usually takes between 3-4 months to complete a power of sale
- All Properties that are Sold Under Power of Sale are Sold at a Cheaper Cost- This is a commonly held myth. In fact properties under the power of sale are sold at or near market value
- The New Owners of a Power of Sale Property Can demand repairs or fixes be completed- In a power of sale purchase, the owner is buying the property in the condition that it is in. In other words “as is.”
- In Ontario many properties in foreclosure are being sold-As mentioned earlier, the default rate of properties in Ontario and across the country is under 2% and is the exception as opposed to the rule.
The Basic Steps of the Power of Sale
If payments are missed on a mortgage contract, or other terms that fall under default such as failure to pay insurance on the property or keep up the property under the terms of the contract, a lender can legally take possession of the property and attempt to sell. A few steps must take place before a property falls under the power of sale. A lender must:
- Allow for 15 days– once a borrower has missed a payment or is substantially late or has broken another mortgage term such as failure to pay insurance on the property, the Ontario Mortgage Act requires that you provide a borrower 15 days to try to rectify the situation before a lender, traditional, or private can exercise the power of sale.
- Send a Notice of Sale to Borrower-Once 15 days have passed after a term of your mortgage contract has not been met, a lender is now entitled to send a letter to your borrower. This letter is referred to as a notice, specifically a notice of sale. The notice of sale letter will specify that the borrower has gone into default and that the borrower has a redemption period to try to rectify the situation by making up any missed payments or meeting the term of the contract that had not been met.
- Lender Will Issue a Statement of Claim- If the borrower does not rectify the financial situation and pay what is due by the end of the redemption period the lender has the legal right to issue what is called a Statement of Claim to address the debt owning and take possession of the property
- Lender Can Take Possession of the Property– After the Statement of Claim has been issued and the borrower has neither paid off the entire mortgage loan plus legal fees, or put the mortgage in good standing, the lender is now in the position to take possession of the property and take legal steps to evict by asking the court for a Writ of Possession. The current owners will be asked to evict the property at a specified date. If they do not leave voluntarily, then they may be forcibly removed by the authorities from the property.
- Take Steps to Sell the Property- It is only at this final step of the power of sale proceedings that the lender can legally possess the property and attempt to sell the property in the condition it is currently in. The fees will be the responsibility of the previous owner and can be very substantial. The profit will go to the former homeowner but will be considerably reduced through the enormous costs associated with a power of sale.
What Can you Do to Stop the Power of Sale?
It is important to understand that there is time for you to catch up with your payments. This is why there is a designated period in place and steps that the lender must follow before taking the legal right to sell your property.
At Mortgage Broker Store we can sit down with you and try to help you stop any power of sale and retain possession of your property. It is also important to consult a real estate lawyer to go over the specific terms about mortgage default negotiated in your mortgage contract.
A few steps that can be taken to try to stop a power of sale include depending on what amount of equity you may have in your property and other factors including the location of your property. It is certainly in your advantage to try everything possible to stop a power of sale to save the often substantial fees associated with a power of sale that will eat into the eventual profit made on the sale of the house. Steps include:
- Attempt to sell the house before the 35 day period expires- If you can sell your property through normal channels, opposed through a power of sale, you will be able to keep the profit ( minus closing cost). This represents a substantial amount compared to the profit you would be left with after a lender has charged fees ranging up to 30,000 through the power of sale process.
- Obtain a second mortgage on your property– Taking out a second mortgage on your property would enable you to cover the costs that you owe to your lender including fees and any arrears owing. The second mortgage will also enable you to cover the mortgage payments more easily, avoiding a power of sale.
- Take out a new primary mortgage- Sometimes breaking your current mortgage and negotiating a new one will enable you to cover the mortgage costs and avoid a power of sale on your property.
Keep in mind that if you want to take out a second mortgage or a new primary mortgage on your property you will need the services of a private lender. These loans, when the property is in arrears and facing the threat of the power of sale are deemed high-risk loans.
A private lender will overlook these issues, including any credit issues, to negotiate new mortgage terms. The Loan To Value (LTV) on these loans will not exceed 75% ( which represents 75% of the appraised value of your home.) Interest rates will be higher than charged by a traditional lender and fees may be higher too.
Mortgage Broker Store is Here to Help
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.
For services in Cities and Towns across Ontario, please see below for more details:
Stop Power of Sale in Ontario
If you have been late in mortgage payments and are currently in default of your mortgage loan, you may have found yourself in the midst of the process of Power of Sale on your home. Although there are legal issues to address, there are still steps that can be taken to possibly stop the Power of Sale going through on your home. Power of Sale still takes time and there are steps that your lender must follow in order to legally carry out a power of sale on your property. It is not too late to sit down with a private lender and take the necessary immediate steps to stop a power of sale going through on your home.
Mortgage Broker Store is here to help you in taking the steps to try to prevent a power of sale going through on your home. We have access to a broad network of private lenders across the Province of Ontario that are both experienced and well established. We will sit down with you, answer any question you may have while working with you to move forward on stopping a power of sale on your valued home. Learn more on how to Stop Power of Sale in Ontario
Second Mortgages in Ontario
When finances may be tight and credit may be a problem, looking into various lending options using your biggest asset can provide a sensible solution. Ontario homeowners can take advantage of existing equity in their home to take out a second mortgage loan secured against their property. If your credit score has been damaged as an Ontario homeowner you can turn to Ontario based private lenders to negotiate a secured second mortgage.
Mortgage Broker Store is here to help Ontario homeowners with any second mortgage applications. If the banks have turned you away we will be able to look to criteria beyond credit worthiness to help secure a second mortgage loan on your property. With a network of established private lenders across the Province, we will be able to work with you to tap into your home’s equity to take out a second mortgage. We will help free up money in your home to put towards immediate financial concerns such as home renovations, student loans or easing the strain of your primary mortgage. Learn how to get a Second Mortgage in Ontario
Private Mortgage lenders In Ontario
Ontario homeowners have a wide range of options when it comes to choosing a lender. Generally lenders will fall into 3 broad categories which include A lenders ( big banks), B lenders ( credit unions and trust companies) and C lenders ( private lenders). With increasingly stringent criteria imposed on Ontario homeowners when applying for mortgage loans by A lenders, many Ontario based borrowers turn to B lenders to apply for financing. If credit is in issue, however, these borrowers will not qualify for a mortgage loan. Don’t despair, private lenders will be able to negotiate loans based on other criteria including existing assets, all sources of income and the appraised value of your home.
Mortgage Broker Store is here to help Ontario homeowners with any mortgage loans that you may require, be it second mortgages, home equity loans, Home Renovations Lines of Credit (HELOC), bridge loans and consolidating loans. With access to a well established network of private lenders across the Province we will address your financing concerns and connect you with a private lender to negotiate mortgage loans to cover short term financial needs while you work to restore your credit. Learn more about Private Lenders in Ontario
Reverse Mortgages in Ontario
Ontario homeowners take pride in their homes. You have worked hard to pay off your principal over the years and look forward to owning your home outright. If you are 55 years or over your financial goals may have changed. You may also be in the enviable position of having paid off the principal of your mortgage loan or the bulk of it. If you are looking to pay for upcoming expenses such as possible home renovations, helping grandchildren or your adult children with finances, don’t take a personal loan, tap into the equity of your house with a reverse mortgage. Reverse mortgages can help you achieve peace of mind while taking advantage of the equity in your valued home.
Mortgage Broker Store can help you in your quest for a reverse mortgage. We are in the enviable position of having access to a vast network of Ontario based private lenders that will answer any question you may have. We will sit down with you and take you through the process of applying for a reverse mortgage. You have worked hard to own your home now make your home work for you. Learn more about Reverse Mortgages in Ontario
Home Equity Loans in Ontario
You have heard it before. Tap into the equity built up on your home. Why not try to consolidate your existing multiple debt payments and roll them into one monthly, easy to manage debt payment. By applying for a home equity loan, you are not only taking advantage of funds already built up in your property, but you can now look forward to one monthly payment with a lower interest rate than other high interest debt you may have including credit card payments.
Mortgage Broker Store can help you with any concerns you may have when applying for a home equity loan. We have vast experience in negotiating mortgage loans ranging from home equity loans to second mortgages, bridge loans and consolidation loans. With access to a vast network of private lenders across the Province of Ontario we will be able to connect you with a private lender to suit your needs and help you achieve financial peace of mind even if current credit issues have been a deterrent with other lending options. Learn more about obtaining a Home Equity Loan in Ontario
Bad Credit Mortgages in Ontario
Even if you are having current credit issues there are still lending options open to you. As an Ontario homeowner or borrower you may have been turned away by the big banks or credit unions based on your credit score. Private lenders can help bridge this financing gap by providing you with different secured mortgage loan options. We will base the criteria of these loan applications on factors beyond your current credit score. By accessing any additional assets you have, looking at all sources of monthly income and assessing the appraised value of your home private lenders can secure a mortgage loan to meet your short term financial goals.
Mortgage Broker Store can steer you in the right direction when applying for a bad credit mortgage. We have access to a broad range of private lending options, each with valuable experience and well established in the Province of Ontario. We will be able to address any questions you may have and work with you to solve your lending needs despite current credit issues. Learn more about how to obtain a Bad Credit Mortgage in Ontario
Debt Consolidation in Ontario
There is nothing worse than debt to provide ongoing worries. Multiple debt payments may give you sleepless nights. Ontario homeowners do have options to help navigate debt concerns. Rather than taking out another potential personal loan, look to utilizing existing equity built in your home to address ongoing financial issues. Even if your credit is damaged and the big banks may not be an option, there are many Ontario based private lenders that can work with you to take out a consolidation loan such as a home equity loan or Home Equity Line of Credit (HELOC). Don’t let credit issues dissuade you from taking the steps necessary to consolidate your multiple monthly debt payments into one monthly payment utilising funds that have built up on your property.
Mortgage Broker Store has access to a vast network of private lenders across the Province of Ontario that enables us to connect Ontario homeowners and borrowers with a private lender to address any credit issues while negotiating private mortgage loans. We will address any questions you may have and work with you to help you achieve your lending needs. Learn how to Consolidate Your Debt in Ontario