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What is the power of sale? It’s a default process that puts the lender in control of the sale of the property. A lender is then given the authority to sell the home or property. Powers of sale allow the lender to sell the home, but the homeowner still owns it.

Default occurs when property owners fall behind on their mortgage payments or fail to meet other mortgage terms. Taking possession of a property and selling it is now legally possible for a lender.

Banks and other lenders have offered mortgage deferrals to more than 750,000 Canadians this year. Some of these programs have ended or will end soon, so borrowers must make both deferred payments as well as new ones.

Many homeowners will wind up facing mortgage arrears due to a "mortgage cliff" as predicted by some experts. Some may have to resort to the power of sale.

In Ontario, what does a power of sale look like? Additionally, if you're a homeowner behind on your payments, you may want to know how to stop the sale of your home.

This guide has the solutions you need, as well as advice on avoiding the power of sale situations.

What Is Power of Sale?

In most mortgages, there is a clause called a "power of sale". In the case of nonpayment of the mortgage, the mortgage lender can sell the property.

When a borrower defaults on a loan, lenders commonly recoup the loan amount through a power of sale. Due to the fact that property is valuable and can be sold, it is usually a straightforward way for lenders to collect their money.

How Power of Sale Differs from Foreclosure

The power of sale may sound like another process you've heard of: foreclosure. In some cases, the bank might foreclose on a house when people default on their mortgage.

Power of Sale vs. Foreclosure: How are they different? Do they mean the same thing?

It may seem like they're similar, but they're two different legal processes. A power of sale allows the lender to sell a property under their control. A power of sale also allows the lender to evict the homeowner.

In contrast, foreclosures give the lender legal ownership of the property. Therefore, they become the owner. All debts and liabilities will be assumed, such as property taxes arrears and liens.

In most cases, however, foreclosure results in a sale, since the lender is able to recoup their money. Lenders prefer the power of sale because foreclosure is usually slower and more expensive. Most power of sale transactions is completed in 90 days or less.

How does the Power of Sale Process work?

By using a power of sale clause, a mortgage lender can take possession of a property if a borrower falls behind on their payments.

First, a lender must issue a demand letter when invoking the power of sale clause. It outlines what is needed from you by the lender to return the mortgage to good standing.

Typically, in Ontario, borrowers will receive a "Notice of Sale under Mortgage."

Notice of Sale Under Mortgage: What is it?

Essentially, it's a demand letter for repayment. Mortgage default will be noted in the notice of sale.

As part of the notice, you'll also find:

• Checklist of items to be paid
• The deadline for paying the listed items. Missed mortgage payments, as well as penalties, typically fall under this category.
• After the default is notified, the notice of sale is drawn up 15 days later. Most items need to be paid for within 30 days.
• The redemption period occurs during this timeframe. Here is your chance to prevent the power of sale proceedings from proceeding and bring your mortgage into good standing.

Notice of Claim, Writ of Possession, and Sheriff's Eviction

The lender and their law firm may move to the next step if a homeowner cannot pay off their mortgage arrears and bring their mortgage back into good standing within the redemption period.

Next, the lender's law firm issues a statement of claim, which is the second step in the power of sale process.

In layman's terms, what is a statement of claim? Basically, you file a lawsuit at a local Small Claims Court or Superior Court of Canada. By default, the court asks that the lender be granted possession of the property.

Statements of the claim are legal documents. It also serves as a notice to others with a stake in the property. Your statement of defence must be filed with the court within 20 days of the lender filing a lawsuit.

To stop the power of sale, the lender may demand that the mortgage be repaid in full after the redemption period has expired.

After that, the lender's law firm will also be able to issue the writ of possession. Essentially, they can appoint a sheriff to evict you from your home using this legal document.

Power of Sale: The Last Steps

You will have an eviction notice from a sheriff and a certain time frame to vacate your property after it was served. Once that happens, your property belongs to your lender.

There is no time to waste for homeowners who wish to halt the power of sale process at this point. You have to take action immediately.

In Ontario, How to Stop Power of Sale

Selling on your terms is the best strategy for avoiding the power of sale altogether. If you're worried about paying your mortgage, selling will allow you to do so. You may then want to consider renting a property or finding a manageable property.

A lender can help you if you are at risk of defaulting on your mortgage and selling your home isn't an option.

You should contact your lender as soon as possible if any payments on your mortgage have been missed. A notice of sale is issued after only 15 days of missing a payment.

After the process has begun, your options and time will be more limited.

What to Do After You Receive a Notice of Sale to Stop the Power of Sale

You have a few choices if you've already received a notice of sale under the mortgage. Paying the lender's demands is the first step. In this situation, quick action could prevent the lender from advancing with the sale. As the process develops, legal and administrative fees will accrue.

The fees will be added to the mortgage. In other words, you'll also have to pay them. The best way to avoid these fees adding up and making getting your mortgage back on track more difficult is to stop the power of sale as soon as possible.

Power of Sale: How can you stop it?

Stopping the power of sale may require you to take out a loan. You should have some equity in your property if you've lived in it for several years.

Arrears on your mortgage can be paid with home equity. In such a way, you can avoid the power of sale and restore your mortgage to good standing. Another name for this is a second mortgage for stopping a power of sale.

A personal loan may be available to you if you have a good credit score. Furthermore, you may be able to avoid the power of sale if you have available credit, such as a line of credit or even a credit card.

There may be savings you could use if these options aren't available.

After the Redemption Period, how to stop the Power of Sale?

After the redemption period expires, you may be concerned about losing your house. It is still possible to stop the power of sale.

Your arrears and court costs may be repaid in court. In the event you were unable to come up with the financing before the redemption period ran out, a court case could result in the mortgage being reinstated.

The lender may ask for full repayment at this point, plus any penalties and costs. The solution may be a private mortgage to stop the sale. You can then pay off the existing mortgage and apply for a new one on the property.

If you're having trouble getting a loan, talk to a mortgage broker. If you need assistance finding lenders who can extend the funds for your mortgage and any added costs, they can assist you.

The best way to avoid eviction is to bring your mortgage back into good standing.

You can pay arrears up to the time when the lender enters into an unconditional agreement of purchase and sale with a new buyer. You can, however, stop the sale if that contract contains a redemption clause.

Whenever possible, you should stop the process. It has already been mentioned that the loan servicer and their law firm will charge all fees associated with the power of sale process to the mortgage. It's your responsibility to cover them if you'd like to pay off arrears or pay off your mortgage.

Stopping Power of Sale Through Legal Means

Sometimes, a legal remedy may be available to help you avoid eviction and stop the power of sale.

Until the appropriate time period passes, the lender cannot move forward with the power of sale. Any action they take too soon can be argued to be a hasty one.

A lender could issue a demand letter after 10 days instead of 15 days. Lenders are acting too quickly, starting the power of sale process too soon.

Alternatively, a lender could issue a writ of possession or a statement of claim before the redemption period has ended.

Lenders can be invalidated if they act in haste. Court orders would then be needed to continue.

Homeowners are also entitled to the information. Upon request, you can get a statement of account and information about the power of sale proceedings. During the first 15 days, the lender must respond or the process may be suspended.

Alternatively, if the lender provides incomplete or incorrect information in response to a request for information, then the process can be suspended.

To avoid situations like this, lenders will most often follow the letter of the law. Legal representation is always a good idea so that the process is followed correctly.

In the event of the lender selling your house, what happens?

In the event you can't stop the power of sale, then your house will be sold by the lender. As a result of the sale, your mortgage will be paid off.

Is it possible that the house sells for more than the amount owing on the mortgage? Besides these costs, any remaining proceeds belong to you.

Most of the time, there is not much left over after the power of sale process. This is due to fees being charged back to the mortgage.

To stop a power of sale, it's usually better to find a private mortgage. That way, you avoid additional fees and keep your home.

For more information on applying for a Second Mortgage in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

Through 2022, Toronto's housing market will likely remain in strong seller's territory because of low housing supply and strong demand.

Single-family homes enjoyed the largest year-over-year price increase last year for single-family homes, rising from $1,477,519 in 2020 to $1,710,304 in 2021 (+15.7%). In 2020, townhouses rose from $835,615 to $935,015 (+11.9%); and condos climbed from $673,708 to $709,602 (+5.3%).

A higher level of inventory supply is expected to lead to higher activity in the fall of 2022 in the condo market, which was the most active property type in the fall of 2021. After COVID-19, increasing levels of employment and income will both be key factors in a growing real estate market.

It became clear very early during the pandemic that inter-provincial migration was a trend that would be sustained through 2022. As a result, Toronto's immigration rate will far outweigh its out-migration trend, inflating Toronto housing prices further in 2022.

In 2022, Toronto housing prices are expected to rise by 10 percent on average.

Canada's Housing Market Outlook for 2022

According to RE/MAX's 2022 Canadian Housing Market Outlook Report, the national real estate market is expected to sustain steady growth in 2022, mainly driven by inter-provincial migration.

Brokers and agents participating in RE/MAX surveys contributed to the report. Housing shortages will continue to drive prices higher for some time. Due to these factors, RE/MAX Canada expects Canadian home prices to rise 9.2 percent on average.

In the summer of 2020, the real estate trends began to see more interprovincial relocation, which is expected to continue in 2022 based on feedback from brokers and agents. Less densely populated areas and neighbourhoods are more affordable and often come with more amenities such as space, which makes them appealing to buyers.

It is quite clear that the housing supply has to be expanded in these regions so they are able to retain these attractive qualities and also their relative market equilibrium. There is a high probability that conditions in these regions will worsen if there are not more new homes built and if demand rises.

The real estate market in Canada continues to be robust despite the global pandemic. A survey done for RE/MAX Canada found that 49 percent of participants believe real estate in Canada will continue to be one of the best investment choices in 2022 (59 percent of homeowners compared to 34 percent of non-homeowners, including renters and those looking to buy). The Canadian real estate market is also anticipated to remain stable next year, with 49 percent of respondents believing so.

The following is a detailed breakdown of TRREB's market outlook for 2022:

• The number of sales through the Multiple Listing Service in the GTA is expected to reach 110,000 in 2022, a drop from 2021, but still a strong result when compared to earlier years.
• Altogether, the average selling price for homes is expected to climb to $1,225,000, up approximately 12% from last year.
• It is likely that housing markets in 2022 will continue to be impacted by factors that include labour market conditions and population growth, as well as the prospect of multiple interest rate hikes by the Bank of Canada this year.
• As a result of the limited number of listings, competition among buyers is expected to remain high and prices will rise by double digits.
• The early stages of the pandemic brought on a trend of migration across provinces, something that had been prompted by the new remote work culture and it is still going on. At the same time, there has been a collective desire for bigger living spaces to make home life more comfortable while working remotely and spending much more time at home.
• Like last year, 2022 will be the same - too many buyers, too few homes available.

A few key factors will keep home sales from reaching last year's record pace.

• The increase in borrowing costs in 2022 will have a negative impact on some consumers on the edge of affordability who may temporarily put off their purchases.
• Despite a year of above-average per capita housing sales in 2021, there will be some reversals in 2022 because there is a smaller pool of buyers.
• As a result, there will always be a shortage of inventory in the Greater Toronto Area, meaning that many potential buyers will not be able to purchase a property.

In the TRREB's latest Consumer Survey, Ipsos polled consumers about their buying intentions for 2022 and the results of those polls indicate that overall spending plans are down, while the percentage of consumers who said they are very likely to buy this year remained consistent with what TRREB forecasted.

According to the findings, buyers who are fully committed to buying a home in 2022 will purchase one, whereas buyers on the fence may decide to put their decision on hold.

A Few Highlights:

With prospective buyers, detached houses remain the most popular type of home, especially in suburban areas.

Condos are expected to be hot property in Toronto for the foreseeable future. New listings should creep up between February and March and then from March to April, when you tend to see a higher number of listings. April tends to be your strongest month for new listings. Thus, you see that your strongest month is generally May - just that some of your listings in April turned into sales in May.

The percentage of first-time buyers is likely to decrease overall over the next few years. There will be fewer homeowners in the Greater Toronto Area (GTA), including Toronto and the surrounding suburban areas, who are likely to list their homes for sale in 2022.

Homeowners in Canada are aware of their home's value as well as its potential for investment. There was considerable anxiety this past year regarding local markets due to rising prices and limited supply, causing frustration among those looking to enter the market as well as those looking to move up in it.

Although there may still be obstacles to overcome, it is encouraging to see that the majority of Canadians are confident in the housing market in 2022 in regards to buying Canadian real estate.

For more information on getting a Mortgage in Toronto, call Canadalend at 1-844-586-0713 or contact us here.

Over time, homeowners build equity as they pay down their mortgage. Their home equity increases as more payments are made on their mortgage. As the housing market fluctuates, the value of your property will also increase, thus raising your equity.

Many homeowners choose to buy something of value with their equity. An instance of this might be an addition to their house, repayment of their existing car loan, or schooling for their children. No matter what the cost may be, they will pay it off with equity.

Considering paying off your mortgage early? Here are some options.

Is there equity in my home?

As long as you’ve been paying off your mortgage for several years, you likely have some equity in your home. Equity is built as you pay down your mortgage. You will need to have your home appraised before taking out a second mortgage using your home equity. Here is how to estimate your equity if you’re just curious or want to get a general idea before you speak with your lender.

What is a good time to take out a home equity loan?

In the event that you need funds for:

• Renovating your home
• Additions or improvements to your home
• Purchase of a new vehicle
• To cover the costs of your children’s schooling
• If you are in business
• Consolidate your debts

These loans are perfect for you if you meet the requirements.

How can I access my home equity?

The following traditional methods of accessing home equity are generally available to homeowners:

• Home equity loans
• HELOC
• Mortgage refinancing
• Second mortgage

Loans for Home Equity

A home equity loan uses your house as collateral. They work the same way that every other secured loan does. Depending on the value of your home, you will be able to borrow a specific amount of money. There will be an interest charge and a fixed payment schedule.

What is the process for getting a home equity loan?

Obtaining a home equity loan requires a number of factors, such as owning a home (which must be appraised by your lender), having a significant amount of your mortgage paid out, and being financially stable enough to withstand the debt you will incur with the loan.

How do I use a home equity loan?

Home equity loans allow you to borrow up to 80% of the appraised value of the property, less what’s still owed on the original mortgage. Both mortgages must then be paid at the same time. 

A Home Equity Line of Credit (HELOC)

An equity line of credit differs from a home equity loan in a few notable ways. Because of this, you have the flexibility to use your line of credit whenever you like, and you can regain full access once the balance is cleared.

What is the process for getting a HELOC?

Banks and most traditional lenders, as well as private mortgage lenders, offer credit lines. In general, banks require that you have a high credit score to qualify. A prospective borrower should have their property appraised before applying for a HELOC to ensure that they have enough equity in their home. In order to qualify for these lines of credit, borrowers must have at least 20% equity in their homes.

What is the best way to use a HELOC?

Approximately 65% of your property’s appraised value can be borrowed with a HELOC. Nevertheless, if your lender allows you to combine your HELOC with the remainder of your mortgage, your borrowing limit will increase to 80% of the home’s appraisal value. If you keep up with your monthly payments, you will be able to borrow from your secured credit line as you please.

Mortgage Refinancing

Using a refinance loan means replacing your old mortgage with a new one. As a result, you will be able to access a portion of what you have accumulated in equity. If you wish to borrow a larger amount, you will have to meet with your lender. The important thing to remember is that you will have to make large payments and your equity will go down. 

How to Refinance Your Mortgage

Mortgage refinancing requires an appraisal of your property. Your original mortgage contract will need to be broken and a new one negotiated through either your current lender or a new lender. If you decide to refinance your mortgage to access your equity, you will be responsible for a prepayment penalty fee if you break your mortgage contract. 

Having a Second Mortgage

Second mortgages are loans taken out against properties that have already been mortgaged. A second loan can then be obtained with your house as collateral. Take care, however, when you get a second mortgage because you’ll have two mortgage payments to make. Due to the fact that your home acts as collateral, if you miss mortgage payments and the lender decides that you won’t pay them back, they have the right to foreclose and possibly sell the house.

Benefits of Using Your Home Equity

Your equity can be used to increase the value of your home. Since your home is a valuable asset, you can borrow against your equity to finance any home improvements that you might want to do. This will increase the value of your home if and when you decide to sell it.

You may be able to deduct the interest from your tax return if you decide to invest the extra money from your second mortgage loan for investments that will generate income.

However, this is not limited to home renovations or financing new properties. Some homeowners use their equity to pay for their children’s or their own education, or even to take a vacation. If you have any other debts with higher interest rates, then you can consolidate them with your equity.

Disadvantages of Borrowing From Your Home Equity

There are various fees that must be paid before you can borrow from your home equity. For example, you must pay an appraisal fee, an application fee, and legal costs before you can access the funds. Initially, variable interest rates can be cheaper than fixed interest rates, so you might choose to borrow at a variable rate. However, be aware that your interest rate may change if you make a variable rate choice.

When you use your home equity for investment purposes, you will face risks. Not only will you be subject to taxes if you use it unsheltered, there is also the possibility of losing your money if the stock market fluctuates.

Foreclosure can result if you default on your payments. If you default on your payments, then your home can be taken. You must therefore be absolutely sure that you can make regular payments before taking out a second mortgage.

What will you do with your home equity in 2022?

Ultimately, only you can decide on how to access and use your home equity. Choose the path that best fits your financial situation. Don’t make the decision before you’ve received all the advice you can, and then weigh all your options carefully. 

For more information on home equity in Ontario, call Canadalend at 1-844-586-0713 or contact us here.

Homeownership is a wonderful way to build wealth over time, but there are also other perks, including the ability to tap into your equity for large expenses. The equity in your home is equal to the value of your house less what you owe on your mortgage and any other liens on your property. It is the value of your house that you own outright.

Home equity loans and home equity lines of credit (HELOCs) can be used to access the equity in your home. Throughout this article, we’ll discuss these two programs and determine which is best for you.

What is the best way to build home equity? 

Defining Home Equity Loans

A home equity loan gives you access to the equity in your house. The funds from a home equity loan will be provided to you in one lump sum, and will then need to be repaid in fixed instalments plus interest, just like an instalment loan. You’ll also be given an exact schedule of when you must make payments.

The terms of paying back the borrowed equity vary from one lender to another. Defaulting on a home equity loan means that your home is at risk if you cannot make your payments, similar to a typical mortgage.

Based on how much equity you possess and how much your lender will loan, you can borrow a certain amount on a home equity loan. For this type of loan, you typically need at least 20% equity in your home, meaning you could borrow up to 80% of its value. You may be able to borrow more, but the interest rate will likely increase as the amount of the loan increases. 

Some pros of Home Equity Loans are that they provide funding for large expenses, and have both a fixed monthly payment that is predictable as well as a fixed rate of interest. In addition, consolidation of debt and lowering of existing debt interest rates are possible.

Cons

• You risk losing your home if you default
• Higher interest rates than HELOCs (although lower than other loan types)

When is it best to use a home equity loan?

Home equity loans can be useful in a number of circumstances. With this type of loan, you can basically use the funds however you want, although certain expenses are better than others.

Renovation Costs

An equity loan may be the best option to cover the cost of renovations. A project that increases the value of your house is money well spent. Depending on how much value is added to the project, many projects will produce a decent return on investment so that you will be able to recoup most or all of your investment.

Consolidate Your Debts

Another reason that homeowners take out equity loans is to consolidate their debt. Due to the fact that home equity loans generally have lower interest rates than typical personal loans (because your home is collateral), you can use the equity from your home to settle any other debts you have, including high-interest debts. With only one loan, you can both save money and manage your debt more easily by securing a lower rate and consolidating several loans into one.

In Case of an Emergency

If an emergency expense arises, you can always use your home equity to pay for it, such as a last-minute car repair. That said, it’s important to be careful about how you use your money. Frivolous expenses shouldn’t add to your debt load. As you’re putting your house at risk, you want to make sure you’re using the money wisely and repaying it as soon as possible.

Definition of HELOC

In the same way as a home equity loan, a home equity line of credit (HELOC) leverages the equity in the home to lend money. HELOCs, on the other hand, are a form of credit line that enables you to access a certain amount of equity in your home, much like the use of a credit card. 

The HELOC allows you to borrow against a set credit limit whenever you require additional funds. Just like a credit card, you can borrow against that available credit when needed. In addition, you do not need to borrow against it at all, and you can let months elapse between withdrawals. When you do need credit, though, it’s there for you.

Pros

• The interest is only calculated on the amount withdrawn
• You can access funds at any time
• Excellent flexibility
• Every time you need extra cash, you won’t have to apply for a new loan
• The loan has a lower interest rate because your home serves as collateral

Cons

• If you default on your mortgage, your home is at risk
• Budgeting payments is more challenging
• An increase in interest rates is possible
• Payments require self-discipline
• Lenders have the discretion to reduce your credit limit

When is a HELOC the best option?

HELOCs are not traditional loans because you cannot receive a lump sum payment that you must repay on a regular basis as is the case with conventional loans. Depending on what you want to do with the money, you can update your home, make car repairs, or even take a vacation or invest in an opportunity.

In reality, a HELOC may be a better choice for those with sporadic expenses that need a little extra help. A HELOC allows you to borrow funds at any time rather than having to apply for a new loan every so often. The only thing you need to do is to withdraw the exact amount of money needed to cover the expense and then just be charged interest on it. Your money can be accessed repeatedly once it has been repaid.

Which is better, a HELOC or a home equity loan?

According to your situation, you will choose a specific loan type. The best choice for you might be a home equity loan if you need a one-time loan to pay for a large expense, such as remodelling your home, and you like the idea of predictability. If, however, you need to borrow funds from time to time without having to apply for a new loan each time, then a HELOC might be a better option for you.

For more information on a home equity line of credit in Ontario, call Canadalend at 1-844-586-0713 or contact us here.