While there are different remedies a lender can access when there is default on a mortgage loan, the most common one in Canada, by far, is where lenders exercise their right – that is their power to sell a property when default has occurred. There is a clause written in the mortgage authorizing the mortgagee (lender) to sell the property in the event of default. After following a strict prescribed set of rules about notice to the homeowner and other interested parties, lenders can use their power to sell the property. They do not take ownership.
As a mortgage term, power of sale is equivalent to the term foreclosure. Once the creditor is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the debtor. The debtor is thereby, completely divested of any interest in the property and has no subsequent right of redemption (recovery of property by paying the mortgage debt in full).
Interested in a Power of Sale property? CoolProperties.ca provides clients with in-depth analysis in understanding power of sale purchases in Ontario. Offers to purchase these types of homes are prepared differently with no warranties, the right of redemption and other matters.