As the largest purchase that you’ll make in your life, owning a home involves careful financial planning long after the transaction closes. Unfortunately, while many homeowners are diligent with their budgeting, external factors such as inflation, changes to interest rates, or personal circumstances could impact your ability to remain on top of your mortgage. 

Should you fall behind on your mortgage payments, you will face certain fiscal consequences – and, in some severe cases, you could face a power of sale or even foreclosure. 

Making this situation even more stressful, some homeowners may hesitate to seek support or solutions due to the personal or sensitive nature of financial hardship. Unfortunately, this hesitation can make the situation worse. 

In this article, you’ll find compassionate, stigma-free guidance on what your options are when facing a potential power of sale. We’ll cover how power of sale applies to homes in Toronto, how you can prevent it from happening, and what the best course of action will be if you must sell. 

Disclaimer: This post will address power of sale from a generalized standpoint. If you’re concerned about making mortgage payments, speak to a real estate agent or your financial advisor for personal advice. 

What is Power of Sale?

Although you are the legal owner of your home, your mortgage lender holds the right to sell it if you default on payments. When elected, this privilege is referred to as the power of sale. 

During a power of sale scenario, the lender proceeds with listing the property for sale – generally on the public housing market. Once sold, the proceeds go directly towards outstanding expenses owed to them, including the remaining mortgage, applicable interest, and legal and closing costs. Any leftover funds are returned to you. 

Power of Sale Vs. Foreclosure?

While similar, it is important to recognize that a power of sale scenario is not the same as a foreclosure. During a foreclosure, your lender will take formal possession of your property before selling it. Once it’s sold, no equity is passed back to you. 

When enacting power of sale, they hold the right to list and sell your home, however, they never take legal ownership of it. 

Aiming for a top-dollar return on your home sale? Explore these additional resources for more insights. 

How Are Homeowners Notified When Power of Sale is Enacted?

Lenders must provide you with a formal written warning before evoking power of sale. This is known as notice of sale. Under Ontario law, they can legally send this notice as soon as 15 days following an absent payment. However, most lenders offer some kind of leniency or grace period, particularly if you’ve been historically punctual. 

After receiving notice of sale, you have a 35-day redemption period to pay off any outstanding debt or expenses – ceasing the power of sale. Once the redemption period has concluded (assuming you are unable to make adequate payments), your lender may proceed with sale preparations. 

Can a Power of Sale Be Halted?

If you are behind on mortgage payments, it’s absolutely essential to take action as soon as you can – regardless of whether you’ve received a notice of sale. In some cases, your lender may offer adjustments to your mortgage or alternative plans for repayment. Therefore, your first step should be to contact them and discuss potential solutions. 

Despite this, you may find yourself in a situation where you will be unable to catch up on your payments regardless of potential solutions. In an instance like this, it is important to be realistic and pragmatic about your options. Therefore, should you reach this stage, your next course of action is to speak to your real estate agent. 

Searching for more nuanced selling advice to help you navigate the Toronto market? Explore these other posts from our blog. 

Taking Action to Protect Your Equity 

As a homeowner, you retain the right to sell your home after receiving a notice of sale (if power of sale hasn’t yet been enacted). If the sale of your home is inevitable, it is far more advantageous to sell it yourself, rather than allowing your lender to list it. 

This is because your lender is only concerned about recuperating what is owed to them rather than unlocking your home’s equity to the fullest extent. As any remaining proceeds of the sale go to you, it’s simply not in their interest to sell your property for more than the bare minimum.  

By hiring a real estate agent and heading to the market proactively, you’re able to earn a higher return on your investment – ensuring you have more funds left over after paying back your lender. 

Selling With Ramsay Group

If you’re facing the possibility of a power of sale or foreclosure, our team can help. Beyond ensuring you get the highest return possible from your sale, we’ll provide compassionate and sensitive guidance to help you navigate the process with minimal stress and anxiety. 

Leveraging our expertise in Toronto’s ever-evolving market, we can also assist you in finding a great place to call home next – whatever your financial standing may be. 

Concerned about power of sale or foreclosure? Ramsay Real Estate can provide compassionate, personalized guidance that leads you toward your ideal result. Click here to contact us by email or call Ken at 416.906.8366 to be in touch. 

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