What is a Power of Sale?
Once a mortgage borrower fails to make their payments, they may receive a document titled “Notice of Sale”. This document signifies the lender’s intention to take the property and it is the first document in the power of sale and foreclosure process in Brantford. A mortgage is a loan which is secured by real estate, and in Ontario, a lender can take control of a property to satisfy unpaid debts. In power of sale, a lender evicts the owners and sells the property on the open market. This is different from the foreclosure process, which is uncommon in Ontario, which results in the lender taking ownership of the property. The proceeds from the sale are used to pay off any debts secured against the property. The entire process in a power of sale can take 4 to 6 months, and it is not uncommon for the lender to charge $20,000 to $30,000 in fees for processing the power of sale. For this reason, it is important to stop the power of sale as soon as possible, as more fees are added to the mortgage as the lender progresses with the power of sale.
How Can You Stop a Power of Sale?
If you are facing a power of sale, the only way to stop it is to pay the lender the amount they are requesting. Initially, if the mortgage is not expired, the lender must accept payment of all missed payments plus fees to put the mortgage back into good standing. This amount and the final day to pay are typically stated on the Notice of Sale document. The borrower is typically given 35 days from the Notice of Sale to pay this amount. Afterwards, the full mortgage balance plus fees must be paid and the mortgage can no longer be put back into good standing. To raise money, most homeowners will either get a new mortgage or simply sell the property. Traditional lenders will not lend to individuals that are facing a power of sale, so a new mortgage must be obtained from a high-risk private mortgage lender. If the homeowner cannot get approved for a mortgage, their best option is to sell the property themselves. By selling the property themselves, the homeowner has more control over the real estate agent, the final sales price, and the sales timeline. This option also avoids the hefty fees the mortgage lender would charge to sell the house in the power of sale process.
What is a Private Mortgage Lender?
Private lenders are individual or small companies that make their business in lending on high-risk mortgages. These lenders exist to serve the people who have been turned down by their bank for a mortgage. These lenders charge higher interest rates and fees than banks do, but they can approve a mortgage regardless of any income or credit issues. Private lenders charge interest rates between 7% and 12% and setup fees equal to 5% to 8% of the mortgage amount. In Brantford, most lenders can lend up to 75% of the property’s value. This means that an example property worth $1,000,000 with a $600,000 first mortgage can borrow up to $150,000 on a second mortgage. If you need to borrow more than 75% of the value of your property, you should consider selling the property as getting a mortgage approval is unlikely.
How Can a Mortgage Broker Help?
Dealing with a power of sale situation on your own can be tremendously difficult, and an experienced mortgage broker can help walk you through the process. Many high-risk private lenders do not advertise their services and it can be difficult to find the best lender for your situation. An experienced mortgage broker will have a network of private lenders that can fund mortgages in Brantford and other cities and towns across Ontario. Ron Alphonso with Mortgage Broker Store is one such broker, and his team specializes in finding mortgages for people facing power of sale and foreclosure. Ron and his team can quickly go over your situation and explain the different options that are available to you.
If you’d like to contact the team at Mortgage Broker Store for free advice regarding your situation you may call 416-499-2122 or email [email protected]