Are your finances leaving you in a tough place? Are you having a hard time making mortgage payments? If you're not careful, a foreclosure could be closer than you think. While it is in the best interest of both the bank and the borrower to avoid foreclosure, sometimes there is no other option.
If you are unable to make your payments and default on your mortgage, the bank will begin measures to recover the debt. If a payment schedule or other resolution can not be agreed upon by the bank and the borrower, the bank will use one of the two most common ways to recover debt.
Power of sale in Canada
A power of sale simply means that the bank can quickly sell your house without the court system getting overly involved. However, there are some steps the bank must take before they can sell your home.
First of all, before before a bank can put your house up for sale, they have to notify you in writing and give you 35 days to pay your outstanding debt. If you fail to do so, the bank will serve you with
a Statement of Claim for Debt and Possession. At this point, you're given 20 days to file a Statement of Defense. If you fail to do so, the bank will start the eviction process.
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Once the eviction process is complete, the bank will put your home up for sale using a real estate agent. Any money from the sale will be used toward the outstanding debt you owe, along with fees charged for the power of sale process. If there is a balance once everything has been paid, these monies will be returned to you. On the other hand, if there is still money owed to the lender after the sale of your home, the bank can sue you for the remaining balance if you do not have mortgage insurance that covers this situation.
Judicial foreclosure in Canada
Unlike the power of sale process, the judicial foreclosure process has a heavy court involvement. As a result, the process is slow, usually taking about six months to complete. The Canadian provinces that offer judicial foreclosures include Nova Scotia, Saskatchewan, Manitoba, Alberta, and British Columbia.
One significant way the judicial foreclosure process differs from the power of sale process is that the bank is able to get a Certificate of Foreclosure issued from the court. This means that the ownership of your property is legally transferred to the lender and once the bank sells your house, you can not receive any capital gains from the sale.
If you're looking to buy foreclosed property, search the online real estate auction platform at Bidiwin.org where you can easily bid online.