“I’m behind in payments…will I be giving my Ontario house back to the bank?”
Nobody wants to lose their home, no matter the circumstances. But sometimes financial circumstances turn against you and those financial commitments become simply too much to manage. In all fairness, there are other reasons things can go south with your property and the costs associated with owning it, such as employment, marital problems, health issues, and others.
If your financial situation deteriorates too far, you may be forced into the unfortunate situation of having to give your house back to the bank in Ontario Ontario, leaving you temporarily without a place to live. Additionally, there may be long-term consequences, such as a dramatic and long-lasting impact to your credit report and score (and your ability to buy a house in the future – and sometimes even to lease a home). Not to mention the distress and anxiety to you and your family of going through the power of sale or foreclosure process.
No one wants any of the above. It’s far from an ideal outcome. Fortunately, there is a strategy you can employ today to help you proactively protect yourself and get back on track to financial stability.
Here’s a brief overview of the foreclosure or power of sale process
The foreclosure process can vary depending on location and the type and amount of mortgage you have on your property.
Usually, if you miss a few mortgage payments, your property lender will start sending you notifications and eventually warnings. Over time, if you fail to catch up on the mortgage payments you missed, your lender may put your home up for public auction under a process called power of sale.
How long you can stay in your house after it is sold publicly depends on the jurisdiction you live in. At some point, however, you will need to find a new place to live.
Fortunately, you have options!
If you wait until your home is foreclosed on, or the power of sale process is commenced, it can have a devastating effect on your credit rating. One option to protect yourself is to work out an arrangement with the lender whereby you cooperate with them in their process of selling your property to recover their principal and interest funds, and that way they may save the money they would spend on foreclosure or power of sale proceedings, which can be significant. You may then be able to avoid having a foreclosure or power of sale listed on your credit report.
You can also avoid foreclosure or power of sale by selling your house before it’s sold by your lender. If your loan is paid in full then there will be no more penalties against you and your credit rating (If your loan isn’t paid in full you will need to make up the shortfall).
Here’s an example: Let’s say you owed $100,000 on your home and you sold your home to us for $90,000. You (actually, your real estate lawyer) would give that money to the loan company, along with $10,000 to make up the short-fall, and your loan would be paid off. (If you speak with a real estate lawyer, you may be able to negotiate a deal with the lender whereby the lender/bank agrees to not go after the difference in exchange for your cooperation.
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I want to avoid giving my house back to the bank in Ontario!
Why do people choose to sell their home instead of going through foreclosure or power of sale? (After all, they still don’t live in their home anymore in either scenario.)
Well, losing a home can be difficult but the impact on your financial situation and your credit is considerably less than if you simply wait out the foreclosure or power of sale process. In fact, going through foreclosure could impact your credit score by as much as 150 to 250 points. So the short-term challenge of selling your house is still a better choice than the long-term pain of giving your house back to the bank (and then often struggling to find a new home in a short period of time).