Buying a house is the biggest investment in your life. It is also a fulfillment of your dream of living in a house of your own. But there are circumstances in life which are beyond your control which may adversely affect your dream home, such as losing a job, illness, passing away of a breadwinner and other similar situations.
When any of these unfortunate circumstances arises, you will experience financial difficulty in meeting your financial obligation, including your mortgage payments. After exhausting all your efforts to keep your monthly mortgage payments up to date failed, and no solution is in sight, you are better off selling your house first before your lender sells it through the process of power of sale.
When your house is on power of sale, you will pay unnecessary legal fees and related expenses that could amount in thousands of dollars that could certainly diminish whatever equity is left on your house.
Furthermore, when you could not update your mortgage payments within the time specified on the power of sale documents, legal fees will increase, as the process will go to the next level to the court of law for disposition.
When judgment is rendered against you, a judge will order an execution and a sheriff will come to your house to evict you. This is a very distressing situation.
In addition, you have no more control on your house and your lender will sell your house to the highest bidder. Usually it is below the market value as the lender would not wait for the best offer.
Finally, when the house is sold with a shortfall – meaning the proceeds of sale is not enough to pay the balance of the mortgage, mortgage payment arrears, legal fees, appraisal fee, agent’s commission and related disbursements, the lender or the insurer of your mortgage will run after you and your co-signers. If you could not pay the shortfall amount, your wages could be garnished including your co-signers’ and your assets could be seized.
The writer, during his more than fifteen years of helping people with financial difficulties, has seen many people experienced the above humiliating fate as they tried to keep their houses in vain.
Considering the unfavorable results of letting your lender sell your house when you are in financial difficulty, it would be much better for you to sell your house first before your lender does.
Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.