Power of Sale VS. Foreclosure in Ontario
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If you find yourself unable to pay your mortgage, you may be facing the potential repossession and forced sale of your home. In Ontario, this can happen through one of two legal procedures available to mortgage lenders: the power of sale or foreclosure.
Depending on which method is used, and where you are in the process, your options to remain in your home and your financial outcome may differ.
What is Power of Sale?
- The lender can evict occupants and sell the property
- Must sell for fair market value – NO deep discount allowed
- Homeowner receives profits after all fees and outstanding mortgage is paid
- Faster process than foreclosure
- Less involvement with the court system
- Most POS can be completed within 6 months
- Lender retains the right to sue the borrower for any shortfall if the sales proceeds do not fully cover the full balance owing plus costs and fees.
A lender need only wait 15 days after a missed payment to begin a power of sale process. The process involves:
- the issuance of a Notice of Sale by the lender
- 30-40 day redemption period during which you can bring mortgage arrears current
- the issuance of a Judgement by the court and finally
- a Writ of Possession giving the mortgage lender the right to evict occupants (with the assistance of the Sherriff) and sell the home.
What is Foreclosure?
- The lender takes title of the property
- The lender must sue the borrower in court and wait for a judgment
- The entire legal process takes more time than POS (can take up to a year)
- There is more legal work and high costs involved
- Once process is finished, the lender takes title and NO profits for the borrower
- Lender losses the right to sue for any shortfall
- The lender has complete legal ownership and right over the property to do with as they please. They can rent it out or sell it.
Key Differences between Power of Sale & Foreclosure
Power of Sale
Lender obtains right to sell
Can begin as soon as 15 days after the first missed payment
No court involved in Notice
Redemption period (usually 35-40 days) during which you can bring the mortgage current
Lender has a duty to sell for fair market value
Equity or profit paid to the borrower
Lender can sue for a shortfall
Lender obtains legal title or ownership
Usually begins after 3-6 months missed payments
Lender files suit in court & court issues demand for payment
The redemption period is usually 30 days but can be extended
No duty to sell for the highest price
Equity or profit kept by the lender
Lender cannot sue for any shortfall
What can a homeowner do to stop the process (POS or Foreclosure)
In both cases, the homeowner needs to pay the mortgage lender.
- Get a second mortgage to bring the first mortgage into good standing
- Replace the problematic mortgage with a new mortgage.
- Sell the property before the lender takes possession.
The best solution depends on:
- The value of the property
- Total value of all mortgages and
- What stage of the process the lender is in.
Some common Myth’s
- The deal is always final
- POS takes no time at all
- Properties are sold for under market value
- You can ask for repairs to be done
- There is an abundance of foreclosure properties across the country.
** If you are in arrears with your mortgage and looking for a way to get caught up with back payments, please contact us at PrivateMoney4Mortgages assistance.