What is Power of Sale?
In the city of Hamilton and the rest of Ontario, the lender can use the power of sale process if the borrower fails to make mortgage payments. In the power of sale process, the lender evicts the homeowner to sell the property and recoup their investment. At the end of the process, all secured debts are paid off in the order in which they were placed on the property. At the end of the process, any remaining profits from the sale go to the former homeowner. At the end of the process, there are usually additional fees in excess of $30,000. It is usually in the homeowners best interest to stop to power of sale before the eviction takes place.
How is It Different from Foreclosure?
In Ontario, the power of sale process was adopted as a superior alternative to the foreclosure process. The foreclosure process can take over a year and is very costly. The power of sale process usually takes 4 to 6 months and is cheaper than foreclosure. In foreclosure, the lender takes ownership of the property. In foreclosure, the former homeowner has no rights to any profit from the sale of the property. While foreclosure is still a valid option in Ontario, it is very rare. In addition, a borrower can petition the courts to change a foreclosure process into a power of sale process. A mortgage lender may opt for the foreclosure process if they feel that the total mortgage debt is far below the value of the property. In general, the power of sale process is considered to be more fair to homeowners, as it gives them the profits from the forced sale of their property.
Refinancing to Stop Power of Sale
If the lender that is processing the power of sale is paid off, then the process stops immediately. The payment amounts needed can depend on the status of the mortgage. If the Statement of Claim is not yet sent, and the mortgage term is not expired, the borrower can stop the process by paying arrears and fees. If the borrower has received a statement of claim, or the mortgage is expired, then the entire balance plus fees must be paid. Most banks will refused to provide loans to people in power of sale, so you will have to seek out a private mortgage lender. Private mortgage lenders are able to approve mortgages regardless of a person’s credit score and income. For Hamilton, private lenders can approve a mortgage request as long as the total amount of debt on a property does not exceed 75% of the property’s value. These lenders can stop the power of sale by registering a second mortgage to pay arrears and fees. They can also stop the process by paying out the in default mortgage in its entirety.
Selling Your Property Before Eviction
If a new mortgage would put your debts above 75% of your property’s value, getting a new mortgage may not be possible. In this case, the best option is usually to sell the property before the eviction date. When the homeowner sells the property themselves, they have more control over the final selling price, the real estate agents, and the timelines. The homeowner will also avoid many of the fees lenders charge for processing a power of sale. In order to sell before the eviction date, the homeowner will need to price the property competitively in order to get a relatively quick sale. For borrower that are already close to eviction, some private lenders can offer short term mortgages up to 85% of the property’s value which would allow more time to sell the property. Additionally, some of these lenders are able to purchase the property outright to prevent an eviction.
How a Mortgage Broker Can Help
The power of sale process can be complicated and stressful for homeowners. An experienced mortgage broker can quickly outline your options and help you create a plan to stop the power of sale. They can go though the power of sale documentation with you and explain where you are in the process. A mortgage broker will quickly be able to tell you if you can qualify for a private lender mortgage and what the rates and fees are likely to be. If you cannot qualify for a private lender mortgage, a mortgage broker can help you arrange to sell the property. The team at Mortgage Broker Store exclusively focuses on private lender and stopping power of sale on properties across Ontario. For a free consultation with their team, call 416-499-2122 or email ron@mortgagebrokerstore.com
