Ontario Foreclosure vs Ontario Power of Sale

What are the differences between the two?

By law, in Ontario, a mortgage lender has the right to take possession of property. This happens if mortgage payments have failed to be made.  You have two options.. Power of Sale or Foreclosure. The two processes can result in two different outcomes for a homeowner. Many homeowners do not know the difference between the two. It is important to know which process is being used.

Features of the power of sale process

In a power of sale, the lender is allowed by law to evict anyone living on the property and sell it if the borrower is in default of the mortgage. The lender has the right to sell the property at a reasonable price and can’t be sold at any discount, whatsoever. After the home is sold, the previous homeowner has any right to any profits made from the sale, after reducing debt repayment and fees.Since all the profit goes to the previous homeowner, the lender doesn’t earn any extra profit from the power of the sale process. Power of sale is a faster process than foreclosure and requires less involvement with the court system. Most power of sales take about six months to complete, but foreclosures can take up to a year to complete.

Features of the foreclosure process

In the foreclosure process, the lender is able to take title to the property. The lender has to sue the borrower in court and wait for judgment to be given by the court. Once the foreclosure is completed, the lender takes title to the property and the borrower does not have any right to any profit made from the sale of property. Therefore, if the mortgage is much less than the value of the property, the lender is able to make a large amount of money using foreclosure.

Key differences between Power of Sale and Foreclosure

• In Power of Sale the lender sells the property and in Foreclosure the lender takes title to the property
• In Power of Sale the former homeowner gets the remaining profits from the sale of the property and in Foreclosure the previous homeowner gets nothing
• The Power of Sale takes about 6 months and Foreclosure can take up to a year maybe even more

What can a homeowner stop Power of Sale or Foreclosure?

1. Get a second mortgage to bring the first mortgage into good standing
2. Replace the problematic mortgage with new mortgage
3. Sell the house before the lender sells it

If you need assistance with your situation, it may be a good idea to contact a mortgage broker that has connections with high-risk mortgage lenders that specialize in the power of sale and foreclosure properties.