Whether we complete the purchase of your home or not is largely dependent on financing. Financing in the form of a mortgage can come from a lending institution such as a bank or a  private lender. The reality is that many people continue to rely on mortgages because of the extremely high costs involved in buying a home. In either situation, without sufficient financing, we cannot complete the purchase on your behalf. Thus, mortgages are crucial and mortgage brokers (if there is one) and you as the purchaser, have to be diligent in securing financing. 

A part of being diligent means that you, as the Purchaser, should communicate with the bank well before your closing date to make sure you do qualify for a mortgage. You will need to provide the bank with all of their required documents – please try and get these documents in as soon as early as possible. 

If we are not in possession of mortgage instructions at least two days before closing, it is extremely difficult for us to complete your purchase. The reason being that we need to prepare a variety of documents in accordance with the lender requirements in order to secure funding for the day of closing. 

The failure to complete the transaction is a serious breach of contract. What does this mean? It definitely does not mean you can simply walk away. What it does mean is that there may be significant financial costs involved in not closing which includes but is not limited to  costs for damages should the seller take you to court. 

It is extremely important that you as a purchaser bring in all the necessary documents and ensure that you have finalized all the mortgage details.  This will make what can be a daunting process, a lot easier. 

Pre-approval

You can reach out to your lender institution prior to actually buying the house to determine whether you will be approved for a mortgage. Most of the major banks provide some sort of guarantee that the interest they disclose to you during the preapproval will be guaranteed for at least90 days. However this varies from each institution. Please contact your institution for further information. 

Mortgage Options

There are two main mortgaging options available to you; a fixed mortgage and a variable mortgage.  A fixed mortgage means that you “lock in” a certain interest rate for a specified length of time (ex. 5 years). A variable mortgage on the other hand means that the interest rate fluctuates with the market.   

Defaults

What does it mean when you are in default under the Mortgage? In most scenarios, a default under a mortgage means that you have not made the payments as required under the terms. While there are other forms of being in default, this is the most common one. 

Power of Sale

What are the options available to a Lender when a mortgage is in default? 

One of the remedies available, and most frequently used by a lender, is the Power of Sale. A Power of Sale  allows the lender to sell the property if you fail to make the adequate mortgage payments in a timely manner.  It is critical that you familiarize yourself with the provisions in respect to Power of Sale . Before alender can sell a property under the Power of Sale, the default must have continued for a period of fifteen days. The act (reference the specific act – Mortgages Act) further states that the sale itself cannot take place until thirty-five (35) days have passed since the notice has been served on the Borrower.  Now, lets assume that the Mortgage does not have provisions in respect to Power of Sale. Then, the default is to look to Parts II–IV of the Mortgages Act. 

The statutory power of sale provisions of Part II do not apply in the case of a mortgage that contains a power of sale. 

Notice of Sale

The process by which a Notice of Sale is issued should be reviewed carefully. A notice of sale is a legal requirement that must be issued before the lender can sell the property. Minor defects can have negative consequences.  First and foremost, you need to determine who is to receive notice of the Power of Sale. The rule is that every single person in priority in subsequent order to the mortgagee should be served at the same time. Moreover, the spouse of the Mortgagor must also be given notice on the basis that spouses, pursuant to ss. 19(1) and 22(1)–(2) of the Family Law Act, have the right of redemption parallel to the titled spouse.  

 In drafting the Notice of Sale, it is important to follow the statutory requirement as set out in Part III of the Mortgages Act. This rarely changes. A further sub search should be conducted on the date the Notice is issued and this must be done by way of Registered Post. 

The following is a summary of the obligations of a mortgagee selling by way of a Power of Sale:

1. A mortgagee is not a trustee of a power of sale for the mortgagor; his or her right is to look after himself or herself first, but the mortgagee is not at liberty to look after his or her own interests alone nor to sacrifice the property of the mortgagor. 

2. The mortgagee, in exercising a power of sale, must act bona fide and take reasonable precautions to obtain a proper price. A price just sufficient to cover the outstanding debt may be seen as disregarding the mortgagor’s interests. 

3. The mortgagee need not delay the sale in the hope of an improvement in market conditions. 
4. It is the duty of a mortgagee to behave as a reasonable person would behave in the realization of his or her own property.
5. Consideration should be given to the best means of publicizing the sale of the property, whether it be through newspapers, trade journals, or multiple listing services. 

6. A “for sale” sign should be put on the property. 

7. After having obtained appraisals, the mortgagee must keep the market value set forth in the appraisals in mind as a benchmark and should not accept an offer well below the appraised value. 

8. If the sale yields a surplus over the amount owed under the mortgage, the mortgagee must hold the surplus in trust for the mortgagor or subsequent encumbrances. 


What are the options available to a Mortgagor?

1. Under s. 22(1) of the Mortgages Act, a borrower may pay the amount in debts along with costs incurred by the Mortgagee and the mortgage is no longer in default. There is no discretion to the courts otherwise. This right lasts until there is a sale of the property. 
2. If a Power of Sale proceeding has started, then it may be the case that the Borrower requires information as to the amounts owed under the mortgage to bring it into good standing. 
3. Another option available to the Mortgagor is to assign the debt. Section 2 of the Mortgages Act requires the mortgagee to comply with this. 
4. The foregoing is generally the accepted standard when it comes to enforcing a mortgage under a power of sale. It is always prudent to err on the side of caution in ensuring that every step is followed through with accuracy. 

Please note the content on this web site is provided for general information purposes only and does not constitute legal or other professional advice of any kind.