Defaulting on a mortgaged property has consequences.
If you’re worried can banks foreclose during COVID-19, here’s our legal advice. Banks can foreclose if you lose your job or take sick time to recover from a pandemic or serious injury. Only your own quick thinking can stall or stop a mortgage default.
Axess Law refinances mortgages when you need to prevent mortgage default by using a private lender to restructure debt, temporarily or long term.
We can transfer title to family or close sales transactions if a real estate deal is in your future.
Ask us if you need legal advice on what you can do to stop a lender that plans to take your home.
What Happens When You Default
Banks and private lenders have three practical remedies if you default on a mortgage. Standard charge terms in your mortgage documents allow your lender to:
- move to foreclose on the property
- issue a power of sale
- or apply to an Ontario court for a judicial sale.
Foreclosure in Canada
Imagine your home is worth $950,000 and the mortgage $50,000. Would you expect your lender to profit from a mortgage foreclosure in Canada by selling your home and pocketing the difference?
Yet that’s what could happen if your property value exceeds your mortgage. Because your bank takes the whole title to your property, it assumes the entire burden and benefit of an asset you may have carefully built up over many years.
Since you wouldn’t want that to happen, Axess Law suggests you find another lender.
Power of Sale Actions
Now consider power of sale.
Your bank gets court approval to sell your home, without changing legal ownership. The title remains in your name and your lender collects only what is owed them, plus court damages and fees involved in recovering the mortgage.
Your home is worth $950,000, the bank sells it, keeps their $50,000 and returns whatever is left. After deducting interest payments and legal fees, any balance is owed to you as owner.
The fact is, most lenders prefer power of sale — and that works to your advantage.
What a Notice of Sale Means
When you get a notice of sale in the mail or by courier, it means your lender is considering going to court to get a power of sale.
You may have missed a payment by 15 or more days, stopped making mortgage payments altogether or breached other mortgage terms. For instance —
- your home lacks fire or flood plain insurance, leaving your most valuable asset at risk
- it’s condemned or in serious disrepair, reducing its value
- you’ve used your home to secure debts you can’t repay..
The notice will tell you what you need to do to remedy a default, such as make outstanding payments, plus pay costs and interest. You have 40 days or more to fix any issues with your mortgage.
You can bring the mortgage into good standing by making the requested payments. If you can’t pay, call Axess Law. We refer you to trusted real estate lawyers near you for legal advice.
Defending Legal Claims
You have just 45 days to find a mortgage remedy once a notice of sale is received. Otherwise, your lender will issue a statement of claim for debt of possession.
The statement of claim asks a court for permission to sell the property, as specified in the mortgage terms. Read the fine print in your mortgage contract for information on what to expect.
By now, if you haven’t contacted Axess Law, make that a priority. You can still list your property for sale while you wait for a notice of claim to arrive. Your realtor or buyer doesn’t need to know power of sale proceedings are pending. That could get you a better price than selling under financial duress.
Challenging Power of Sale
Presuming your home is not selling or you aren’t prepared to list it, you can always challenge the power of sale.
Ontario borrowers have a right under the Mortgages Act to request information about accelerated principal due under their mortgage terms or the costs of a power of sale legal claim.
Lenders are required to provide a correct and complete statement of the principal and/or costs within 15 days. Your lender’s right to enforce a claim is suspended if they fail to respond on time.
Quick Action Challenges
Legal proceedings are invalid if your lender issued a legal claim before your 37-day period expired.
The notice of sale will state your lender requires payment of the entire mortgage balance. Paying arrears and costs brings your mortgage into order under the Mortgages Act. The act only calls for payment of any outstanding amounts. You can end any enforcement action by just paying the arrears and costs.
Courts are more than agreeable to giving borrowers an injunction, or order preventing your lender from continuing a power of sale action if your mortgage payments are brought and kept up to date.
Courts award injunctions when borrowers can show reasonable grounds to believe a few more days or weeks will result in a positive outcome for all involved and that the lender will be fully financially compensated.
Acceptance of Partial Payments
As long as you make a partial payment, you may be able to argue a lender’s immediate legal claim is ended. That forces your lender to start a new legal action for non-payment.
Writ of Possession
Despite all your efforts, you could still face the loss of your home. When your lender is successful at court, they may issue a writ of possession forcing you out your home so it can be sold. Axess Law recommends you get immediate legal advice if you are facing power of sale or possession action.
Why You Need a Lawyer
Axess Law has mortgage lawyers near you in Ottawa and Greater Toronto Area.
We can prepare legal documents to refinance mortgages you arrange through private lenders or transfer title to a property to family or investors to prevent a foreclosure or power of sale.
Our flat rate legal fees are cheap — just $649.99 plus HST to transfer a title in Ontario or $799.99 and up plus HST to refinance mortgages.
Book Appointments Online or By Phone Today
Book online to make your own appointments. Our easy booking software makes it quick and secure. You can make day or evening appointments, whatever suits your schedule, at Axess Law locations near you.
We have onsite parking and transit is nearby.
Click here to learn more about Axess Law’s real estate law services.