What is the difference between power of sale and foreclosure?
Matrix Mortgage Global – What is the difference between power of sale and foreclosure?
In Ontario, when someone defaults on their mortgage, the lender has two main courses of action they can take. These are Power of Sale and Foreclosure. If you have been served legal notice by your mortgage lender, it is important to know which of these two courses the lender is taking as each can result in a very different outcome.
What is Power of Sale?
With Power of Sale, the mortgage lender can evict those living in the property and put the home up for sale. By law, they are required to sell the home at a fair market price and if there are any profits left over once the debt owing has been paid back to the lender, those profits go to the property owner.
What is Foreclosure?
Foreclosure works a little differently. While Power of Sale allows the lender to sell the property only, Foreclosure also allows the lender to take ownership of the title. Foreclosure is a lengthier process because it requires taking the property owner to court.
When a home is foreclosed on, the lender gets the title and may sell the home but in this case, any profits go to the lender and the property owner gets nothing.
How can you avoid power of sale or foreclosure?
Most lenders would rather have you be able to make your mortgage payments than go through the process of power of sale or foreclosure. Fortunately, even if you have gotten yourself into some financial difficulty, there are usually ways to avoid foreclosure or power of sale.
- Getting a second mortgage – If you have enough equity in your home, you may be able to get a second mortgage that is large enough to put your first mortgage into good standing.
- Get a new mortgage to replace the mortgage that you are having problems with.
- Sell your property – this is often the most difficult choice because most people do not want to lose your home. Selling your property before the lender takes it however puts you in the driver’s seat and is sometimes your best option particularly if you are facing a foreclosure.
The right solution for you is going to depend on a number of factors such as amount owing on the mortgage, value of your home, and which course of action the lender is pursuing. To determine what makes the most sense for you, you should sit down with a mortgage broker and review your situation.
If you are facing power of sale or foreclosure, a member of our team would be happy to help. Contact our office today.
At Matrix Mortgage Global, we can help you get started on this path. Call us today at 1-877-371-5293.