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Avoiding Foreclosure and What You Need To Know!

In Canada, the two main ways a lender can recover a mortgage debt after a borrower defaults is by Judicial sale or power of sale. A Judicial sale is a sale conducted with court approval and jurisdiction. The lender must apply to the court to get the court’s permission to sell the property. A power of sale allows a lender to sell property without court approval. The lender has the right to sell the property under the mortgage document and/or provincial laws authorizing power of sale for each province.

Power of sale is used as the lender’s primary method of recovery in Newfoundland, New Brunswick, Prince Edward Island, and Ontario. Judicial sale is the primary debt recovery method in British Columbia, Alberta, Saskatchewan, Manitoba, and Quebec. In Nova Scotia, the primary recovery process is called “Mortgage Foreclosure” or “Mortgage Foreclosure and Sale,” but is conside red a judicial process, as the court must approve the sale.

However, in BC and throughout Canada, homeowners do have options to stop the foreclosure proceedings. Here are some common methods:

  1. If you are falling behind in your mortgage, you should not wait too long before you contact your lender and ask them to set up a repayment schedule for you to get caught up. You may need to take out equity in your home to make the payments.
  2. Refinance or modify your mortgage to a lower and more affordable payment by extending the loan term or getting a fixed rate loan.
  3. File for bankruptcy, which will immediately stop the foreclosure stop for a limited amount of time. This legal action allows you and the lender to negotiate an agreement to repay the loan so that you can get caught up and stop the foreclosure process.
  4. Sell your home if you have equity and pay off the loan. You must make enough from the sale to also pay your closing fees, costs and other expenses.
  5. Request a short sale from your lender in which you simply hand over the loan to the lender and walk away, or you offer the lender a lesser amount of money to get out of the loan.
  6. Have a real estate investor purchase your loan. You may also be able to negotiate a rent back with an option to purchase the home using your monthly rental credits as a down payment.
  7. Redemption. Pay all amounts current that are in default including any fees and costs and attorney’s fees.

These are the most commonly used methods to stop the foreclosure process in BC and Canada. I suggest you consult with an expert to help you choose the best method for your financial situation and goals.


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