Monday, July 18, 2011

Power of Sale in Toronto – Why Do They Happen?

Many people think about Power of Sale and associate it as a consequence to a person who defaults on their mortgage payment. Defaulting on mortgage payments is just one of many things that can trigger a power of sale.

Every mortgage has “standard charge terms”. These are terms that apply to all of the institution’s mortgages. If any of these terms are breached the financial institution could demand to be paid in full. If you can’t pay off the mortgage then the mortgage lender could put you into power of sale.

Here some common standard charge terms that don’t relate with not making your mortgage payments yet financial institutions take very seriously.

1. You must keep your property taxes up to date. Failing to do so could change the banks secured position on title. If they learn that your property taxes are in arrears, they may pay them on your behalf at which point they will demand payment in full from you, or call in your mortgage. If the bank pays your property taxes on your behalf or there is a property lien that has to be removed, you could be subject to administrative fees and legal fees in addition to the property tax arrears and interest.

2. You must maintain valid fire insurance on the property with the bank listed as the loss payee on the policy. Failing to do so is serious because it puts the bank at serious risk to lose their security if there is a fire in your home. If you allow your fire insurance to lapse, the insurance company will inevitably notify your bank. Obtaining fire insurance after a previous policy has lapsed can be expensive – especially if the policy was cancelled for non-payment.

3. You must occupy the residence as your principal residence. Tenants have different rights than homeowners. Lenders will often not extend high ratio mortgage financing on rental properties because the process of evicting tenants is long, expensive and complicated.

4. You cannot perform construction or major renovations on the property without consent from the bank. Many folks start renovations and then run out of money, thereby depreciating the value of the bank’s asset.

Most of these issues, like defaulting on mortgage payments, occur because individuals run into financial problems and simply can’t make ends meet. The ironic thing is that your home may be the answer to these problems. Refinancing your mortgage or obtaining a second mortgage could give you the financial relief and flexibility to clear up financial issues and start you back on a fresh, firm, financial footing.

Unfortunately, powers of sales in Toronto are all too common despite being easily avoided. If you are at risk of your home going into power of sale visit

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