Understanding Your Personal Liability In An Alberta Foreclosure
Your personal liability in an Alberta foreclosure refers to any money you may owe the lender if the property being foreclosed on is worth less than what it ends up being sold for. With the price of homes and the down market, this can be serious business and you need to understand the potential consequences you’re facing.
When it comes to your personal liability in an Alberta foreclosure, you need to start by determining what type of mortgage you have in place as this can help you understand how much of any shortfall you may be responsible for.
Once you know this, you’ll have a clearer idea of how much you could be on the hook for with any outstanding debt you may owe your mortgage lender and even how you can move forward. So let’s start by breaking down the two most common types of mortgages in Alberta.
If you were fortunate enough to obtain a Conventional Mortgage (defined as a mortgage based on a downpayment equal to or more than 20% of the purchase price), and you live in Alberta, the lenders only remedy in the case of a defaulting borrower is to foreclose and sell the house. If there is not enough to pay the mortgage, (known as the “deficiency”), then the lender is out of luck.
On the other hand, if you have a High-Ratio Mortgage (defined as a mortgage based on a downpayment amount of less of than 20% of the purchase price), that mortgage is most likely insured by one of three Canadian mortgage insurers; Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty. When a mortgage goes into default, and the debts can’t be repaid from sale proceeds, then your personal liability in an Alberta foreclosure can be much higher!