Process of Stop Power of Sale in Toronto

As a homeowner in Toronto, you probably take a lot of pride in your home. But what if you were in danger of losing your home? If you have run into financial challenges and have not kept up with your mortgage payments, then you may be facing what is known as a Power of Sale.

This means that your mortgage lender may have (or may soon have) the authority to evict you and sell your home. Fortunately, there are things that you can do to stop a Power of Sale. And in this article we are going to discuss ways that you can do just that.

What is Power of Sale?

Let’s begin by understanding what a Power of Sale is. Some people compare it to a foreclosure, but a Power of Sale is actually a different process entirely. A Power of Sale can be activated when a homeowner’s mortgage is in arrears.

Through a series of legal steps, the homeowner is given an opportunity to bring their mortgage back into good standing with the lender. If the homeowner is unable to do this, the lender will be able to sell the home and use the proceeds to recoup what they are owed. Any leftover money from the sale goes first to other creditors and then to the homeowner.

How does power of sale work in Toronto?

In order for a Power of Sale to be legal in Toronto, certain steps must be followed. When the borrower gets behind in their mortgage payments, the lender needs to first notify the borrower that they are in arrears. The borrower then has 15 days to pay off what is owed before the lender can take any further action.

Once this time period lapses without payment, the lender can issue a Notice of Sale which is a legal document that must be sent by registered mail. Upon receiving the Notice of Sale, the borrower now has 35-40 days to bring the mortgage back into good standing. This timeframe is called the redemption period.

After this time has passed – and the borrower has still failed to make payment – a Statement of Claim can be issued. This is what allows the lender to begin the process of evicting the borrower and putting the home up for sale.

Unlike in a foreclosure, the lender does not get the property title in a Power of Sale – only the authority to sell the home. Because of this, they must only sell the home at a fair market value. (They may not sell it at a deep discount just so they can sell it more quickly).

Proceeds from the sale then go to the following entities in the following order:

• The lender.
• Other creditors or those that may have liens on the property.
• The borrower/homeowner (if there is any money left).

How long is the Power of Sale process in Toronto?

Once the Power of Sale process has begun, it will proceed on a very predictable timetable. The process flows are follows:

• After the borrower has been notified by the lender that they are in default, the lender must wait 15 days before issuing a Notice of Sale.
• After those 15 days an Notice of Sale may be issued and the lender must then wait another 35-40 days (the redemption period) before they may take the next step.
• After the redemption period, the lender may apply to the courts for authority to take possession of the property.
• The time it takes to sell the property is market dependent. (It is possible to stop the Power of Sale right up until closing day).

How to stop Power of Sale in Toronto?

Now that you have an understanding of how a Power of Sale works, you probably want to know how you can stop the process and keep your home. The good news is that there are a number of ways that you can do this.

Strategies to stop of Power of Sale include:

• Pay back your lender what you owe – this is the simplest solution, but it needs to be said. If you have the means to pay off what you owe without causing yourself undue stress, do it. This may mean you need to dig into your savings.
• Refinance your mortgage – another option is to replace the problem mortgage with a new one. Refinancing means you are breaking your mortgage with your current lender but getting a new mortgage to pay off the current one. With a refinancing, you will likely have to pay a financial penalty, but to save your home it may be worth it.
• Get a second mortgage – another option is to borrow from your home equity and get a second mortgage. A second mortgage is simply a secured loan that is tied to your home equity. The interest rate on a second mortgage will usually be higher than a mortgage refinance, but there won’t be a financial penalty. You will likely need help from your mortgage broker to determine which of these two options would be a better choice for you.
• Get a Stop Power of Sale loan – if borrowing from your home equity doesn’t appeal to you – getting an unsecured Stop Power of Sale loan is another option. These types of loans rely on your home equity to determine how much you are eligible for, but they are not secured with your home equity.
• Sell your home – although your goal is probably to prevent your home from being sold, selling your home is still usually a better option than allowing the lender to do it. If you cannot obtain funding to pay back the lender, then at least if you sell your home yourself you may be able to get a better price for it. You will still have to pay back the lender, but financially you could be further ahead by selling your home yourself.

What is the best solution to stop a Power of Sale in Toronto?

Now that you’ve reviewed the various ways that you can stop a Power of Sale in Toronto, you may be wondering which of these ways is the best. Well, the truth is – there is not "best". There is only the best for you.

Since each situation is unique, the right solution is going to be different for different people.

If you can easily bring your mortgage back into good standing by accessing your savings, that will likely be the best way.

If you need to do it by getting a loan, you need to sit down with your mortgage broker to determine which type of loan makes the most sense for you. Refinancing may make sense if you are already close to the end of your mortgage term, but if you recently renewed, you may be better off getting a second mortgage.

Or, if borrowing more money from your home equity is likely to cause you more stress, then getting an unsecured Stop Power of Sale loan may be your best option.

Your mortgage broker can help you review the advantages and disadvantages of each option.

How do I get the best interest rate on a loan to stop a Power of Sale in Toronto?

If you are going to get a loan in order to stop of Power of Sale, then it’s important to get the best interest rate that you can. And the best way to do this is to work with your mortgage broker.

Mortgage brokers have contacts with dozens of lenders and they will compare rates on your behalf in order to help you get the best deal.

How can I stop a Power of Sale in Toronto if I have bad credit?

Those facing Power of Sale are usually in that position because they are having financial challenges, so many do not have a very good credit score.

Fortunately, it is still possible to stop a Power of Sale even if you have bad credit.

Mortgage brokers have contacts to a wide variety of lenders including lenders that work specifically to help those with bad credit. If you have bad credit, don’t let that prevent you from contacting a mortgage broker to help you stop a Power of Sale.

Advantages of working with a mortgage broker to stop a Power of Sale in Toronto

While it is possible to stop a Power of Sale without a mortgage broker, it is strongly recommended that you do work with one. The advantages of working with a mortgage broker include:

• They are familiar with the Power of Sale process and can help you through it.
• They can review your circumstances and recommend the best course of action for you to stop a Power of Sale.
• They can use their network of lenders to help you get the best possible deal on a loan – even if you have bad credit.

Contact us today!

Are you facing a Power of Sale? If you are, take the first step in stopping it by contacting us today to speak with one of our mortgage brokers.