As a homeowner, your mortgage is the largest (and most important) portion of your monthly housing expenses. With that being said, it’s incredibly important that you stay as punctual as possible with payments. Should you fall too far behind on your mortgage, you could face a power of sale (POS) scenario and potentially lose your home altogether.
Thankfully, avoiding a POS situation is possible for most homeowners when the right action is taken.
In this blog, I’ll share a few important tips for preventing a power sale scenario.
Curious about buying a power of sale home in Etobicoke? Click here to read my blog post about everything you need to know before buying property under Power of Sale.
How Does Power of Sale Work?
Before discussing strategies for avoiding a power of sale, let’s clarify what it actually is.
Under law, a lender has the right to intervene when a homeowner can’t pay back their mortgage or falls too far behind on payment. When this happens, the lender may evoke the power of sale, which allows them to legally list and sell the home in order to recuperate the money owed to them.
Once the home sells, all proceeds go towards paying off the mortgage and remaining debt (including interest and closing costs). If there are any leftover funds after that, they are passed back to the homeowner.
As a side note, POS is different from foreclosure. In a foreclosure situation, the bank takes full ownership of the home and sells it. They get to keep all of the proceeds from the sale even if it exceeds the debt owed.
When a home is sold under POS, it’s listed on the market just like any other for-sale property would be. In some circumstances, the real estate agent hired by the lender may specifically advertise the home as a POS property, but not always. Nine times out of ten potential buyers don’t even notice a difference between POS homes and traditional listings.
Having a strong financial plan is an important part of buying a home. Check out these related blogs for more advice on home buying.
- Buying a House Under $1 Million in Etobicoke? Here’s What to Expect
- How Much Does It Cost to Buy a House in South Etobicoke?
- Why You Should Consider Buying A Home In South Etobicoke
Don’t Commit to Home You Can’t Afford
When it comes to mortgage troubles, prevention is the best medicine. That sounds a bit cliche, but it’s true. If you want to avoid falling behind or potentially defaulting on your mortgage, don’t buy a home that you can’t afford.
Of course, this isn’t always relevant advice for every buyer or homeowner. Sudden life changes like losing your job or going through a divorce can suddenly put you in a financial position you weren’t in before.
I Missed a Mortgage Payment, Now What?
Falling behind on your mortgage can be a scary feeling, but it doesn’t mean there’s no hope at all. If you do miss a mortgage payment or think you’ll be late in making one, get in touch with your lender as soon as you can. Even if they haven’t yet sent a notice of missed payment, connecting with your lender proactively can give you more options for managing the situation and preventing possible escalation.
In situations where the homeowner’s financial setbacks are seemingly temporary, most lenders will offer some type of plan for repayment or refinancing. That said, these short-term solutions aren’t always a fix.
Depending on your personal circumstances, completely catching up on mortgage payments may simply not be feasible. When this happens, the next best step is to talk to your real estate agent.
Think you may need to sell your Etobicoke home? I’ve got advice for that too – explore these blogs next!
- 3 Errors That Can Hurt Your Home Sale
- How to Get Your South Etobicoke Home Ready For Sale
- Mistakes to Avoid When Selling Your Etobicoke Home
Don’t Wait, Talk to Your Agent
If you believe that you won’t be able to get back on track with mortgage payments and are worried about losing your home, the best past forward will likely be selling your home preemptively and paying back your lender independently. While you’ll still have to move out of your current place, this step ensures you’re able to get as much money from your home as possible and sell on your timeline (to a certain extent).
When a lender sells your home, they’re really just looking out for their best interests. However, by taking the initiative and selling your home independently, you can make the most out of a less-than-ideal situation.
Thinking about selling your home? I can help! Call or text me at 647-239-7587 or send me an email at melissa@southetobicoke.com to get started.
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