What a Power of Sale Costs
What a Power of Sale Costs a Homeowner in Ontario, and Why There Is Often Nothing Left
The costs of a power of sale are added to what the homeowner owes. This page sets out each cost, gives the estimates in a table, works through an example a homeowner can change to their own figures, and explains why an agreement reached early often leaves more in hand.
What does a power of sale cost a homeowner in Ontario?
The costs of a power of sale are added to what the homeowner owes: interest keeps building until the sale closes, the lender's legal costs and default fees and penalties are added, and the sale itself carries realtor commission plus HST and legal fees. In Stonefield Capital's experience, when the total owing already adds up to most of the property's value, the interest, legal fees and other costs of mortgage enforcement often use up whatever equity was left, and a shortfall can remain. Stonefield Capital can review the situation, and the homeowner should get independent legal advice before agreeing to anything.
What Gets Added to What the Homeowner Owes, Line by Line
Each cost is described here. The estimates and the worked example below put figures on the largest of them.
Interest
Interest keeps building on every mortgage at its own rate from the last payment made until the sale closes: through the legal process until the home is listed, then from listing to sale, then from sale to close. In Stonefield Capital's experience, once the home is listed, selling it takes 40 to 120 days and closing the sale takes a further 30 to 90 days; interest keeps running until the sale closes.
The lender's legal and enforcement costs
The lender's lawyer prepares and serves the notices, deals with any court steps and handles the sale, and the lender's costs of doing so are added to what is owed.
Default and Penalties
Once a mortgage is in default, the fees and penalties the mortgage itself sets out, such as missed-payment fees and default administration fees, are added to the balance, based on each lender's Schedule of Provisions. Default and Penalties, in Stonefield Capital's experience typically 3 Months' Interest, plus $3,000 to $5,000 in service and administration fees, plus discharge fees of $1,000 (minimum), based on each lender's Schedule of Provisions. The mortgage statement or the lender's payout statement shows them.
Securing, insuring and keeping up the home
While the lender is enforcing, the costs of securing the home, insuring it and keeping its property tax paid are added as well.
Property & Other Admin Costs, when the lender takes possession
When the lender has to take possession of the home, the costs of doing so are charged to the homeowner's side like the other costs, including items such as moving, storage, cleaning, painting or other remediation or repairs. They do not arise on every file. Property & Other Admin Costs, in Stonefield Capital's experience $10,000 to $60,000 when the lender has to take possession of the home; they include items that might add costs: moving, storage, cleaning, painting or other remediation or repairs.
Selling the home
The sale carries realtor commission, plus HST on it, and the legal fees of closing it. Realtor fees, in Stonefield Capital's experience 3% to 5% of the sale price, 4% on average, plus 13% HST: $30,000 to $50,000 before HST on a home worth $1,000,000.
Who Pays These Costs
In Stonefield Capital's experience, the interest, legal fees and other costs of mortgage enforcement are paid out of the sale before the homeowner receives anything, so in practice the homeowner bears them.
When a lender sells under the power of sale that the Mortgages Act itself gives, the Act applies the money from the sale in this order: the expenses of the sale, then the interest and costs due on that mortgage, then its principal, then subordinate mortgages and charges by their priority, then certain tenants' rent deposits, and pays what is left to the homeowner (Mortgages Act, section 27).
What a Power of Sale Costs: The Estimates
| Cost | Cost range | % of loan | $ on the example |
|---|---|---|---|
| Total interestThe mortgage's own rate on the amount owed, shown here at 10% a year | 10.1% to 22.2% of the amount owedThe three periods below, added up | 16.3% | $130,000 |
| Legal processing to listing | 8.2% to 16.4%10% rate × 300 to 600 days ÷ 365 days a year | 12.4% | $99,000 |
| Listing to sale | 1.1% to 3.3%10% rate × 40 to 120 days ÷ 365 days a year | 2.2% | $17,500 |
| Sale to close | 0.8% to 2.5%10% rate × 30 to 90 days ÷ 365 days a year | 1.7% | $13,500 |
| The lender's legal costs | $10,000 to $50,000This depends on the lawyer's hourly rate and the time they spend on the file: the more complex the file, the more hours. | 3.8% | $30,000 |
| Default and PenaltiesBased on each lender's Schedule of Provisions | 3 Months' Interest (2.5% of the amount owed), plus $3,000 to $5,000 service and administration fees and a $1,000 (minimum) discharge fee3 Months' Interest: = (10% interest ÷ 12 months in a year) × 3-month penalty = 2.5% of the amount owed Service and administration fees: $3,000 to $5,000 Discharge fees: $1,000 (minimum) | 3.1% | $25,000 |
| Realtor fees + HST | 3% to 5% of the sale price, plus 13% HST | 5.7% | $45,500 |
| Only if the lender has to take possession of the home | |||
| Property & Other Admin CostsIncludes items that might add costs: moving, storage, cleaning, painting or other remediation or repairs. | $10,000 to $60,000Depends on the amount of work required to get the home ready for sale; varies by lender. | 4.4% | $35,000 |
Where these estimates and the example below come from
- A home worth $1,000,000 with $800,000 owed across its mortgages.
- An interest rate of 10% a year.
- In Stonefield Capital's experience the legal process takes 300 to 600 days from the last payment made until the home is listed for sale; the estimates charge interest for 300 days at the low end, 600 days at the high end, and the midpoint, 450 days, for the average. Listing to sale and sale to close come after that.
- In Stonefield Capital's experience, once the home is listed, selling it takes 40 to 120 days and closing the sale takes a further 30 to 90 days; interest keeps running until the sale closes.
- The lender's legal costs, in Stonefield Capital's experience $10,000 to $50,000.
- Default and Penalties, in Stonefield Capital's experience typically 3 Months' Interest, plus $3,000 to $5,000 in service and administration fees, plus discharge fees of $1,000 (minimum), based on each lender's Schedule of Provisions.
- Realtor fees, in Stonefield Capital's experience 3% to 5% of the sale price, 4% on average, plus 13% HST: $30,000 to $50,000 before HST on a home worth $1,000,000.
- Property & Other Admin Costs, in Stonefield Capital's experience $10,000 to $60,000 when the lender has to take possession of the home; they include items that might add costs: moving, storage, cleaning, painting or other remediation or repairs.
A Worked Example You Can Change
The table below applies the estimates above to an example home. The figures above the table can be changed, and the table fills in again as they are typed.
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An estimate from the figures above and Stonefield Capital's experience of what enforcement costs. It is not a quote, a prediction or legal or financial advice. Every file is different.
| Step | Cost range | Average | Equity remaining |
|---|---|---|---|
| Equity at the start | $200,000 left | ||
| Total interestCharged at 10% a year on the total owed of $800,000 | $82,000 to $178,000The three periods below, added up | $130,000 | $70,000 leftLow: $22,000 | High: $118,000 |
| Legal processing to listing | $66,000 to $132,000$800,000 balance × 10% rate × 300 to 600 days ÷ 365 days a year | $99,000 | |
| Listing to sale | $9,000 to $26,000$800,000 balance × 10% rate × 40 to 120 days ÷ 365 days a year | $17,500 | |
| Sale to close | $7,000 to $20,000$800,000 balance × 10% rate × 30 to 90 days ÷ 365 days a year | $13,500 | |
| The lender's legal costs | $10,000 to $50,000This depends on the lawyer's hourly rate and the time they spend on the file: the more complex the file, the more hours. | $30,000 | $40,000 leftLow: −$28,000 | High: $108,000 |
| Default and PenaltiesBased on each lender's Schedule of Provisions | $24,000 to $26,0003 Months' Interest: = ($800,000 balance × 10% interest ÷ 12 months in a year) × 3-month penalty = $20,000 Service and administration fees: $3,000 to $5,000 Discharge fees: $1,000 (minimum) | $25,000 | $15,000 leftLow: −$54,000 | High: $84,000 |
| Realtor fees + HST | $34,000 to $57,0003% to 5% of the $1,000,000 home value, plus 13% HST | $45,500 | short by $30,500Low: −$111,000 | High: $50,000 |
| Only if the lender has to take possession of the home | |||
| Property & Other Admin CostsIncludes items that might add costs: moving, storage, cleaning, painting or other remediation or repairs. | $10,000 to $60,000Depends on the amount of work required to get the home ready for sale; varies by lender. | $35,000 | short by $65,500Low: −$171,000 | High: $40,000 |
In Stonefield Capital's experience, the earlier in mortgage enforcement a homeowner starts negotiating, the more money is left, because interest, legal fees and the other costs have had less time to build. Each row of the table is a cost that has not yet been spent at the stage before it.
How Stonefield Capital Can Help
- Put a proposal to the lender. With the homeowner's written permission, Stonefield Capital takes an early-sale proposal to the lender, which can leave more money in the homeowner's pocket than waiting for the lender's sale.
- Introduce a lower-cost realtor. Where selling on the open market is the better route, Stonefield Capital can introduce a realtor who charges a lower commission.
- Find a buyer quickly. Stonefield Capital can introduce a buyer who is able to close quickly, with a payment to the homeowner for moving costs or rent at the next home where the lender agrees.
A refinance is harder at this level. Stonefield Capital can look at both a refinance and an early agreed sale.
In the shorter case, about 10 months remain before the home is estimated to be listed for sale, and the options narrow as that date approaches.
Stonefield Capital is paid by the buyer, not by the homeowner. The homeowner should get independent legal advice before agreeing to anything, and the lender may say no.
Why a Refinance Is Rarely Available at This Point
Stonefield Capital generally lends up to about 70% of a home's value in the Greater Toronto Area, and up to around 65% elsewhere in Ontario.
In Stonefield Capital's experience, once mortgage enforcement proceedings such as a power of sale are underway and lawyers are involved, a lender willing to refinance is rarely found when the total owing adds up to more than about 80% of the property's value.
Where the mortgages come to less than that, the guide to stopping a power of sale with a private refinance explains how a refinance works.
How a Power of Sale Usually Ends Once It Has Begun
In Stonefield Capital's experience, once mortgage enforcement has begun, contesting it in court rarely stops it: lenders win almost every ruling, because a lender's right to enforce a mortgage in default is long settled, and the process ends with the lender taking possession of the home and selling it.
A writ of possession can be issued only with the court's leave, and the court grants leave only where everyone living in the property has had enough notice of the court case to have been able to ask the court for relief. A writ of possession stays in force for one year and can be renewed (Rules of Civil Procedure, rule 60.10).
The Ways Out of a Power of Sale
In Stonefield Capital's experience, once mortgage enforcement proceedings are underway, the ways out usually come down to four: paying the arrears and costs in full, selling the property, bringing in someone else's money or property, or agreeing an early sale with the lender.
Pay the arrears and costs in full
Where a missed payment has made the whole mortgage due before the end of its term, the homeowner can, despite what the mortgage says, pay what is actually in arrears and the lender's necessary expenses at any time before the sale, and is then relieved of the default (Mortgages Act, section 22). Once the mortgage's term has ended, the whole balance is due in any case and has to be paid.
Sell the property
The homeowner can list the home with a realtor and sell it before the lender does, paying the lender out of the sale.
Bring in someone else's money or property
A family member's funds, a co-signer, or another property offered as security in place of this home or in addition to it can make a refinance possible where the home alone cannot.
Agree an early sale with the lender
Where none of those fits, Stonefield Capital can introduce a buyer and put that buyer's proposal to the lender with the homeowner's written permission. The agreement can include a payment for moving costs or the first months' rent at a new home. No payment is promised, and the lender may say no.
Why Cash in Hand Usually Beats Waiting
In Stonefield Capital's experience, when the total owing already adds up to most of the property's value, the interest, legal fees and other costs of mortgage enforcement often use up whatever equity was left, and a shortfall can remain.
The worked example above works this through with figures. An agreement reached now, which can include a payment for moving costs or rent at a new home, may leave the homeowner better off than waiting for the lender's sale.
Stonefield Capital can introduce a buyer and is paid by the buyer, not by the homeowner. The lender may say no, and the homeowner should get independent legal advice before agreeing to anything.
What Stonefield Capital Can Do, Step by Step
A first look at the figures
Stonefield Capital reads what the homeowner sends through the form below: the balances, the estimate of value and any lender documents, and compares what is owed with what the home would sell for.
A plain answer on which option fits
Stonefield Capital tells the homeowner which option fits the situation, including when a refinance or an open-market sale fits better than an early agreed sale.
A buyer and a proposal to the lender, only with written permission
Where an early agreed sale fits, Stonefield Capital can introduce a buyer for the home and put that buyer's proposal to the lender, only after the homeowner gives written permission. The agreement can include a payment to the homeowner for moving costs or the first months' rent at a new home. Stonefield Capital is paid by the buyer, not by the homeowner.
The homeowner decides
Nothing is agreed until the homeowner signs, and the homeowner should get independent legal advice before agreeing to anything. Stonefield Capital does not give legal advice, and Stonefield Capital cannot make a lender agree: the lender may say no.
Questions Homeowners Ask at This Stage
What does a power of sale cost the homeowner?
Is there usually money left after a power of sale?
Can a mortgage be refinanced during a power of sale?
What are the ways out of a power of sale?
Send Stonefield Capital the Details
Stonefield Capital reviews what is sent here and contacts the homeowner by phone or e-mail. Nothing goes to the lender without the homeowner's written permission.
Related pages
Borrower guides