Power of Sale in Ontario When You Owe About What Your Home Is Worth: The Options Before the Lender Sells

Why Waiting Usually Costs the Homeowner More

Once power of sale proceedings begin, the lender's legal costs start mounting, and those costs get added to what the homeowner owes. Interest keeps building on the mortgage while the home is unsold, and property tax and home insurance keep falling due.

In Ontario, a lender who has not been paid can serve a Notice of Sale under the Mortgages Act and, after the redemption period, sell the home without going to court. The homeowner keeps whatever is left after the debt and costs, but loses control of the sale and the price.

When the mortgages, arrears and costs add up to about what the home is worth, there may be nothing left after the lender's sale, so every added cost comes out of what little the homeowner has. The earlier the homeowner acts, the more options are still open.

The Options a Homeowner Can Still Choose Between

Until the lender's sale closes, an Ontario homeowner can still choose between these options. The earlier the homeowner chooses, the more of them are still open.

1. 1

   Option 1

   Bring the Mortgage Back Into Good Standing or Refinance

   A homeowner can redeem the mortgage at any point before the sale closes by paying the arrears, costs and fees in full.

   Where there is still equity in the home, a private mortgage can pay out those amounts and end the power of sale. The pages below explain how a private refinance works and when a private second mortgage fits.

   • Stopping a power of sale with a private refinance →
   • Private second mortgages →
2. 2

   Option 2

   Sell the Home on the Open Market Before the Lender Does

   The homeowner can list the home with a realtor and sell it before the lender's sale closes. A sale on the homeowner's own timeline usually preserves more value than a power of sale would.

3. 3

   Option 3

   Agree an Early Sale With the Lender

   An early agreed sale ends the power of sale before the lender sells the home itself. A buyer's proposal goes to the lender, the homeowner leaves the home on an agreed date, and the lender avoids months of enforcement.

   The agreement can include a payment to the homeowner for moving costs or the first months' rent at a new home. No payment is promised. The lender decides whether to agree, and on what terms.

4. 4

   Option 4

   Let the Power of Sale Run

   If the homeowner does nothing, the lender sells the home at the lender's pace and price, and the costs of the process keep being added until the sale closes. A completed power of sale causes serious credit damage, although the damage is not permanent.

What Stonefield Capital Does, Step by Step

1. 1

   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.

2. 2

   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.

3. 3

   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.

4. 4

   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.