In many Canadian provinces, mortgages contain a standard "power of sale" clause. In basic terms, the power of sale clause gives the lender certain rights and allows them to recoup their losses quickly if you fail to make your mortgage payments. However, there are some provisions in the clause that may help you as well. Power of sale allows you to avoid legal foreclosure of your property. While the lender can still repossess your home, foreclosure proceedings are usually beyond your control. You maintain some rights and control under power of sale proceedings. The following are four ways you can benefit.
Ownership of Property
If your lender repossesses your home and you have a power of sale clause within your mortgage, you retain ownership of the property until it is sold. In foreclosure proceedings, the lender takes ownership of the property. This can be very beneficial to you because it gives you some control over the proceedings.
With power of sale, lenders do not have to go through the court system to get the right to list your property for sale. They can do so after you have been delinquent for a set amount of days and after giving adequate notice to you. When the court gets involved, as it often does in foreclosure proceedings, your property will be liquidated by the court system in drawn out proceedings. For this reason, power of sale usually moves along much quicker.
Method of Sale
A real estate agent will sell your home for the best possible price under the power of sale provision. If your home is foreclosed upon, however, it can be sold by the sheriff at auction for well below market value. As you can imagine, the former gives you a much greater chance of satisfying your mortgage.
Profit and Loss Entitlement
When your home is foreclosed, you do not have any rights to the profit earned from the sale of the home. If your home sells for a profit under power of sale, you will get the money earned minus any fees.
Power of sale clauses may seem scary at first, but they can actually be beneficial to you. If you fall behind on your mortgage payments, you can keep your home if you remedy the situation. You may also be able to recoup some of your equity with a power of sale rather than a foreclosure. Contact a lender, like Mortgage Associates Ontario, for more help.