What is the power of sale process?

For mortgages in Port Hope and the rest of Ontario, when the borrower fails to make payment the lender can evict using the power of sale process. During this process, the lender can sell the property after eviction in order to get their investment back. Once the lender sells the property, they must pay off all the debts in the same order in which they were put on the property. This means that the first mortgage must be paid off first, then the subsequent mortgages. Any profits from the sale must be given to the former homeowner, but much of the time, fees related to the mortgages will reduce any profit. All fees related to processing the power of sale are charged back to the mortgage. These fees can be upwards of $30,000 in some cases. For this reason, it is usually in the homeowners best interest to stop the power of sale before the eviction.

How are Power of Sale and Foreclosure Different?

In Ontario, power of sale is the preferred method for lenders and is used in the majority of mortgages. While a foreclosure can take over a year to complete, a power of sale takes only 4 to 6 months to complete. When a foreclosure is finished, the lender takes the property and all the equity in it. When a power of sale is completed, the lenders can recover their money and fees but they must send all profits to the former homeowner. While lenders have the option to use either power of sale or foreclosure, most prefer power of sale in order to recover their money more quickly. The borrower can also ask the courts to change a foreclosure process into a power of sale process. Many people consider the power of sale process to be fairer, as it typically results with the homeowner receiving some money after the sale.

Getting a New Mortgage to Stop a Power of Sale

The only way to stop the power of sale is to pay the lender the money they have requested. Once the lender has received payment, they must stop the power of sale process immediately. The lender is legally entitled to request different amounts depending on which stage the power of sale process is in. If the homeowner has not yet received a statement of claim, and if the mortgage is not expired the homeowner may pay just the arrears and fees. If the homeowner has received a statement of claim, or if the mortgage is expired, the lender is entitled to the entire balance of the mortgage plus fees. The majority of traditional lenders won’t be able to provide a mortgage to a borrower in power of sale. Private mortgage lenders can lend up to 75% of the value of a property in Port Hope. The money raised from this private lender mortgage may be used to pay off the lender that is threatening the power of sale. A private lender can either loan a second mortgage to pay arrears and fees or they can pay out the entire mortgage with a new first mortgage.

Selling the Property to Prevent Eviction

If you cannot get an approval for a mortgage with a private lender, your best option is typically to sell the property yourself. When the lender sells the property, the homeowner has no control over the selling price, the real estate agent, or the timeline of the sale. By selling a property before a power of sale, the homeowner will avoid many of the fees associated with the power of sale process. Since the entire power of sale process takes 3 to 4 months, the homeowner will need to set a price for the property that would encourage a quick sale. If the homeowner is close to eviction, there are some highrisk lenders that can offer mortgages up to 80% of the value of the money with the condition that it is to be sold after the mortgage is arranged. Some real estate investors can also arrange to quickly purchase your property in order to prevent an eviction.

Using a Mortgage Broker

Stopping a power of sale can be a difficult process for many homeowners. Many find it difficult to make sense of their legal documents and understand the available options. A mortgage broker that has experience in stopping Port Hope power of sale and foreclosure can simplify the process. A mortgage broker can explain the documentation to you and quickly outline your options. Ron Alphonso is the principal broker at Mortgage Broker Store and an expert in dealing with power of sale and foreclosure. The team at Mortgage Broker Store can be reached for a free consultation at 416-499-2122 or ron@mortgagebrokerstore.com.