As a homeowner, if you fall behind or default on your mortgage payments, you could find yourself in hot water. In more serious circumstances, homeowners who are unable to keep up with what they owe may face a power of sale and potentially lose their home.
As a topic that’s closely connected to personal finances, some homeowners who are facing a power of sale may feel anxious or embarrassed about reaching out and getting answers to their questions. We’re here to help.
This blog post will cover the power of sale process, how to stop or prevent it from happening, and what you can do if you must sell.
Note: While this post will provide high-level insights about the power of sale process in Ontario, every situation is unique. For personalized advice about power of sale, speak to a real estate agent.
Power of Sale at a Glance
In Ontario, a lender has the legal right to sell a home or property if the owner defaults on their mortgage payments. When a lender invokes a power of sale, the home is listed and sold on the public market, with proceeds from the sale going towards expenses owed to the lender. This includes the remainder of the mortgage, interest, legal fees, and other costs.
Is Power of Sale the Same as a Foreclosure?
Unlike a foreclosure, in which the bank or lender assumes full possession of a home, the power of sale process only entails the sale of the home. While a power of sale can see the homeowner evicted before listing, the lender won’t actually take on the title of the home.
Additionally, the homeowner receives any remaining profits from the transaction during a power of sale. During a foreclosure, no equity is retained or recovered.
The Process & Timelines
Before a power of sale is officially invoked by the lender, they first will send a formal warning – known as a notice of sale to the homeowner. Once received, the homeowner then has a 35-day redemption period to pay back what is owed and cease the power of sale. After that, the bank can proceed with the legal process of preparing for sale.
Legally speaking, a lender can choose to send a notice of sale 15 days after a missed mortgage payment. That being said, enforcing a power of sale is a fairly extensive legal process, so most lenders will show some leniency early on.
How to Prevent & Stop a Power of Sale
If you miss one of your mortgage payments, the best course of action is to get in touch with your lender. Even if you haven’t received a notice of sale, reaching out as soon as possible is your best chance at preventing the situation from escalating. Depending on your lender, they may provide alternative options for repayment or refinancing.
However, not all homeowners will realistically be able to pay off what they owe and remain on track for keeping up with payments long term. In some cases, preventing the sale of your home may not be feasible.
If you reach this stage or feel that you won’t be able to get your mortgage back in good health, the correct course of action is to speak with a real estate agent.
Staying on top of your mortgage payments begins with a well-budgeted purchase. Explore these helpful blog posts for tips on being financially prepared to buy a home.
- 5 Things Not To Do Before Buying a Home
- 10 Important Tips For Buying Property
- Our Buyer’s Calculator Tool
Why It’s Better to Sell For Yourself
In Ontario, homeowners facing a notice of sale have the right to sell their property independently to pay back their lender. If you’re certain that you’re no longer able to return to good standing with your mortgage, it’s far more beneficial to proactively sell your home rather than allowing your bank to do it.
During a power of sale transaction, the lender is only concerned with making back the money they’ve lent. With this in mind, many lenders will choose to list a home below market value in order to speed up the sales process. As any additional profits from the sale will go to you, your lender has no incentive to get the best result possible.
Therefore the best way to take advantage of the existing equity that you’ve built in your home and get the highest return possible is to sell it yourself.
Choosing the Best Agent Based on Your Circumstances
When you first purchased your home, having to sell it was probably the last thing on your mind – especially under these circumstances.
Selling your home in light of a power of sale can be a difficult and emotional process. Therefore, you’ll want to work with a real estate agent who can not only help you get the best result but is also sensitive to your situation.
At Stephanie De Souza & Associates, we’re honoured to assist our clients in any way they need. As a team that works closely with lenders in Toronto, we have a deep understanding of their needs and perspectives. This knowledge allows us to support and advise homeowners who may be experiencing challenges with their mortgage.
If you’re facing a power of sale on your home, our team can provide compassionate guidance while ensuring you get the best return possible.