Understanding financial strategies and proactive measures a homeowner can use to avoid financial difficulties. It becomes even more critical when dealing with Ontario’s power of sale process.
A power of sale is the legal process lenders use when borrowers default on a mortgage and want their investment and costs back. The process for a power of sale begins when a borrower misses several mortgage payments or breaches a covenant in the mortgage contract.
These breaches include various factors, such as not insuring or using the property illegally. Several legal steps need to be followed.
The borrower is given another chance with a Statement of Defense, which can be filed if the borrower feels that the lender has acted illegally. If that is not filed, the lender can proceed with a default judgment and a Writ of Possession.
That’s when a sheriff can schedule a date to evict those who have defaulted.
Avoiding the power of the sale process is ideal. Being proactive means recognizing the financial red flags.
Don’t ignore these financial headwinds.
Of course, there are other indicators of financial trouble, like unemployment and using credit cards to cover daily expenses. The good news is that there are some proactive ways to stay ahead of a power of sale.
Taking the time to regroup and plan out a budget is an excellent first step to staying afloat financially. Here are a few suggestions.
If you have cash, you can use physical envelopes here. Alternatively, you can allocate certain amounts of your spending to a spreadsheet, and the result will be the same. Either way, this system is all about allocating cash to specific categories, like utilities, groceries, and entertainment.
When you’re out of money in any one of those categories, that’s all you can spend for the month.
You can base a budget to avoid money problems on a previous financial cycle. This is a simple way to build up routines and spending habits. However, you need to take into account expected changes, like increases in utilities or loan interest.
Regarding financial planning, you can build up your equity through one of these budgeting systems and apply for a second mortgage through a private lender. It’s important to remember that these loans are interest-only and can help you through some tight spots. However, it’s still a good idea if you use one of these loans and have an exit strategy like selling.
Getting in touch with your lender as soon as financial red flags start going up shows them you’re willing and responsible to resolve money issues. Being transparent about your situation always helps. Telling your lender you’ve come up against some unexpected expenses or job loss is an honest way to start that kind of communication.
A detailed email is an excellent way to communicate your issues and challenges. It’s always a good idea to include documentation, such as unforeseen expenses and proof of income, wherever possible.
Speaking directly with the lender is an excellent way to discuss refinancing options, payment deferrals, and any possible modifications to the existing loan.
There are government resources and programs that can help people with the power of sale.
Keep in mind that government programs will want to see relevant financial documents, such as proof of income and details about your current financial problems.
Of course, you can get excellent help when facing a power of sale by looking at private loan experts.
Mortgage brokers and financial advisors are two sources of expert help when evaluating a power of sale.
Keep in mind that if you decide to look into a mortgage broker, that can lead to working with a private lender. Private lenders have a streamlined application process, so you can get the money quickly to stop a power of sale.
These alternative lenders are either mortgage brokers themselves or they work with licensed mortgage brokers. The application process for a product like a second mortgage is quicker because private lenders accept different criteria than banks.
For example, an alternative lender will accept contract work and money from freelance endeavours.
Another option is to consult a financial advisor who can help you develop strategies for achieving long-term financial goals, such as debt management and budgeting.
Jonathan and Ron Alphonso are real estate experts. They offer private loan solutions that can help stop a power of sale with a loan. Call 416-499-2122 or email ron@powerofsalesontario.ca. They manage these websites. mortgagebrokerstore.com and powerofsalesontario.ca.
jonathan December 3rd, 2024
