Stop the Power of Sale Process!
As a homeowner you have worked hard to make your home just the way you want it. So, the prospect of losing your home can be scary and emotionally devasting. But that is exactly what can happen if you begin missing or falling behind on your mortgage payment.
When a mortgage holder starts to miss payments, one of the options available to the lender is to initiate a process called Power of Sale (sometimes mistakenly referred to as foreclosure). This essentially means that the lender will be able to evict you from your home and sell it to the highest bidder.
Now, obviously this is something that you don’t want to happen. So how can you stop the Power of Sale process? In this article, we will discuss what you can do to keep your home.
Power of Sale vs. Foreclosure
Although these terms are sometimes used interchangeably, they are actually two different things.
Foreclosure happens when the lender repossesses the home. The lender will actually take the title of the home. In most cases they will re-sell the home, but since they now own the home, it is theirs to do with as they wish.
Power of Sale allows the lender to evict you from your home and sell it, but the title of the home never actually goes to the lender.
Although these differences may seem small when you’re under the threat of losing your home, it is important to understand what you are facing in order to avoid losing your home.
How Power of Sale Works
Power of Sale doesn’t happen all at once – you will usually have time to react. The first thing that happens is that you will receive a Notice of Sale (this can happen 15 days after the initial default). Once that happens, there will be a period of redemption (usually 35 days) in which you have to stop the Power of Sale. To do this, you must pay off your mortgage arears along with any legal fees and penalties. This will stop the Power of Sale and bring you back into good standing with your lender.
Your Notice of Sale will let you know when your redemption period ends as well as outline exactly what you must do in order to stop the Power of Sale.
If you allow your redemption period to end without taking the necessary steps to stop the Power of Sale, it means that the lender will then be able to start taking legal steps to have you evicted from your home. Once it gets this far, your best option for keeping your home will be to pay off the entire balance of your mortgage, so you can see why it makes sense to stop the Power of Sale before things reach this point.
How to Avoid Power of Sale
Once you have a Notice of Sale, you will need to come up with the necessary money quickly. Some options include digging into your savings or getting a loan, however if you have defaulted on your mortgage, there is a good chance that you have exhausted these options already. And since defaulting on your mortgage will invariably damage your credit, it will be difficult to get an unsecured loan.
Fortunately, there are still other options available such as home equity loans or second mortgages and home refinancing. If you have equity in your home, the team at Matrix Mortgage Global can help you tap into this resource in order to pay off your mortgage arrears and penalties so that you can keep your home. This is an important first step towards getting your finances back on track and repairing your credit.
At Matrix Mortgage Global, we work with many lenders who will be willing to overlook your credit and we can match you with the right lender for your situation.
Using Your Home Equity to Stop Power of Sale
Stopping a Power of Sale generally requires you to access a large amount of cash in a fairly short period of time. And even though, you’ve likely had equity building up in your home over the past several years, accessing that equity through a traditional lender can be tough. In fact, traditional lenders such as banks and credit unions are likely to take one look at your credit score and turn you away.
Your best bet is to work with a mortgage specialist with experience in stopping Power of Sale who can match you with an appropriate alternative or private lender so that you can access the equity in your home.
Most lenders that we work with, will allow you to borrow up to 80% of your home equity. That means that if you have $300,000 in equity, you will be able to borrow up to $240,000 which will hopefully be enough to pay off your mortgage arrears along with any legal fees and penalties.
Stopping Power of Sale with a Second Mortgage
One way to access your home equity to stop a Power of Sale is through a second mortgage or home equity loan. With this option, you are taking out a loan from your home equity that is separate and apart from your first mortgage.
This option does not require you to break your first mortgage. Interest rates on second mortgages tend to be higher than interest rates on first mortgages since lenders consider them to be riskier investments however the rates are still lower than the rates on unsecured loans.
Stopping Power of Sale with Mortgage Refinancing
The other main option for accessing your home equity to stop Power of Sale is through a mortgage refinance. With this option, you will have to break your existing mortgage and get a new one that includes both the amount of the original mortgage plus the amount that you owe in arrears and penalty to be paid to your original lender.
Generally speaking, a mortgage refinance will cost you less in interest than a second mortgage however because you’ll be breaking your first mortgage, there will likely be a financial penalty to do so.
Choosing Between a Second Mortgage and Refinancing
When choosing between a second mortgage and refinancing for stopping Power of Sale, you need to look at which option is going to cost you less in the long run. As mentioned, a second mortgage will come with a higher interest rate, but mortgage refinancing will come with a financial penalty.
Usually the financial penalty for refinancing will be lower the closer you are to your mortgage renewal date, so if you are close to your mortgage renewal date, refinancing is usually the better option. Likewise, if you are farther away from your renewal date, getting a second mortgage is likely to be the better option.
Your mortgage broker can run some calculations for you to help you determine which option is going to be the best for you.
Facing Power of Sale? Call Matrix Mortgage Global today!
If you are facing Power of Sale, it can be an extremely stressful time for you and your family. The good news is, there is hope available. Contact Matrix Mortgage Global today and let us help you take the first steps toward keeping your home.