A step-by-step guide to Ontario’s foreclosure process, the rights of homeowners and lenders, and options for avoiding foreclosure.
Foreclosure, a term that can incite anxiety in any homeowner, refers to the legal process where lenders reclaim ownership of a property due to the failure of the borrower to meet the agreed-upon mortgage payments. The process can seem complex and intimidating, but armed with the correct information, homeowners can understand their rights, options, and avenues for avoiding foreclosure. This article aims to break down the foreclosure process in Ontario, illuminating the steps involved, the rights and obligations of the involved parties, and methods to prevent foreclosure.
Step-by-step Guide to the Foreclosure Process
Missed Payments: Foreclosure typically begins after a homeowner misses consecutive mortgage payments. The exact number may vary depending on the lender, but it’s generally after 3 to 4 missed payments.
Demand Letter: The lender will send a demand or default letter to the borrower, notifying them of the missed payments and providing a grace period to resolve the arrears.
Statement of Claim: If the borrower fails to remedy the default within the stipulated time, the lender may issue a ‘Statement of Claim,’ which is the first step in initiating a foreclosure lawsuit.
Notice of Defence: The borrower is given a period (usually 20 days) to file a ‘Notice of Defence’. If no defence is filed, the lender can proceed to obtain a default judgment.
Default Judgment: In the absence of a filed defence, the court may grant a default judgment, giving the lender the right to sell the property.
Redemption Period: Even after the judgment, Ontario law provides a ‘redemption period’, typically six months, during which the borrower can repay the debt and reclaim the property.
Eviction: If the debt remains unpaid after the redemption period, the court will order an eviction, granting the lender full possession of the property.
Property Sale: Finally, the property is listed and sold. The lender recovers the unpaid debt from the sale proceeds, and any remaining amount is returned to the borrower.
Rights of Homeowners and Lenders
While navigating foreclosure, it’s crucial to understand the rights of both homeowners and lenders. Homeowners, despite the foreclosure proceedings, have the right to reside in the property until the eviction order. They also have the right to pay the arrears and halt the foreclosure process during the redemption period.
Lenders, on the other hand, have the right to sue the borrower for mortgage defaults. They can recover their losses by selling the foreclosed property, and in certain cases where the sale proceeds do not cover the owed amount, they can pursue a deficiency judgment against the borrower.
Options for Avoiding Foreclosure
Repayment Plan: Communicate with your lender to negotiate a repayment plan. Lenders often prefer repayment over foreclosure, as it saves time, resources, and potential loss from property devaluation.
Mortgage Refinancing: Refinancing your mortgage to get better interest rates or extended terms can lower your monthly payments, making them more manageable.
Loan Modification: Some lenders may agree to modify the loan terms, including interest rates, payment amounts, or the loan duration.
Sell the Property: If all else fails, selling the property before foreclosure allows you to use the proceeds to pay off your mortgage and protect your credit score.
Understanding the foreclosure process is the first step toward navigating it. The process can be daunting, but remember, several avenues exist to avoid foreclosure and retain your property. It’s advisable to seek legal counsel when dealing with foreclosure issues, as legal professionals can guide you on the best course of action.
At Sabio Law, we specialize in real estate development law and have a deep understanding of Ontario’s foreclosure process. Our experienced team can help guide you, ensuring you’re in compliance every step of the way. Contact us today for more information or to schedule a consultation.