Avoiding a power of sale is a priority for homeowners who are in financial trouble and having trouble making their mortgage payments. The power of sale and the less-used foreclosure are two processes where a lender sells the property when a mortgage defaults.
If you find yourself in a challenging financial position, you can take some proactive measures. The following is some advice and actual tips on how to avoid financial problems, use your resources, and negotiate with lenders to prevent a power of sale.
A power of sale or foreclosure can take up much of your time and ultimately cost you your credit rating. Most lenders won’t want to do it. They prefer to resolve the issue with the borrower, so it’s important to get in touch right away.
If you talk to your lender immediately and are upfront about your situation, they will consider other options like loan modifications, creating a repayment plan, and even forbearance. Here, a lender will suspend mortgage payments for a certain period of time. It’s a temporary solution. Borrowers generally need to catch up on missed payments after the suspension expires.
Loan modifications are good. These involve tweaking the terms so that payments are more manageable for struggling borrowers. These modifications can include extending the loan term, changing the type of loan, and/or reducing the interest rate.
As the name suggests, a repayment plan can add part of a missed mortgage payment to a current one. The total for the missed payment is broken down, and the arrears are paid off over time. This is a good option for people who have had temporary financial problems.
Lenders prefer repayment plans over more formal measures like a power of sale/ foreclosure.
Financial counselling and advice are critical when you’re struggling financially and want to avoid a power of sale or foreclosure. Professional advice when you’re in the middle of a power sale can help you understand your options. For example, there is a Redemption Period after a Notice of Sale.
That’s where there’s a chance to bring the mortgage back into good standing or pay off the entire debt, including the lender’s legal fees. Professional advice from a private lender can also help you get the money to stop the power of sale process through a second mortgage. These experts can tell you about the qualifications to get one of these. That will include a certain amount of equity, which is part of your mortgage-free property.
Expert advice can also help borrowers who are facing foreclosure. A mortgage broker can help you look through your options, and a real estate lawyer can help you with the legal consequences.
Refinancing your mortgage is a consideration when considering a power or sale foreclosure. A second mortgage from a private lender will provide you with the money to stop either process. However, you need to be aware that repaying one of these loans affects the interest, not the principal. That’s why they are considered a short-term solution.
A second mortgage from a private lender relies on the appraised value of your home. The borrower should also remember that interest rates are higher for this short-term solution.
In fact, alternative lenders are offering rates between 8% and 12% as of August 2024. These borrowers also need to consider higher setup fees, which run between 4% and 5%, including lender, broker, and legal fees added to the total mortgage amount.
One of the best ways to avoid a power of sale or foreclosure is to keep your finances in order.
Even if you’ve fallen on financial hard times, an alternative lender can offer a debt consolidation loan. These can combine multiple debts into one payment with a lower interest rate. You can reduce your monthly payments using one of these. That, in turn, can help you meet your mortgage payments.
A debt repayment plan is another option. These are structured and often begin with the highest-interest debt. Like a consolidated loan, they can free up money that can be directed to your mortgage.
Staying ahead of financial trouble can mean having a reasonable budget. For example, the 20 30 50 budget plan includes careful planning. People put away 20% for debt repayment, investments, and savings. Another 30% goes to your wants like hobbies, entertainment, and dining out.
The most significant percentage, at 50%, goes to your needs, such as mortgage payments, transportation, and insurance. Implementing this type of budget before you get in trouble can help you avoid a power sale/foreclosure.
Real estate professionals Jonathan and Ron Alphonso offer alternative loans that can provide the money to stop a foreclosure and power of sale. They are regular sources used by media Outlets like Global News and the Toronto Star.
Their websites include mortgagebrokerstore.com and powerofsalesontario.ca. Contact Ron or Jonathan at 416-499-2122 or by email at ron@powerofsalesontario.ca.
jonathan September 21st, 2024
