Throughout the Greater Toronto Area and much of southern Ontario, the red-hot housing market is experiencing a summer cool-down that’s thrown both buyers and sellers in a frenzy. Since October 2021, fixed term mortgage rates have seen an unusually steep increase from 2.5 per cent to 5.4 per cent in less than 12 months. Variable mortgage rates have increased 2.25 per cent since March 2, 2022. Sliding real estate appraisals have also resulted in detrimental impact (such as defaulting on home purchases), causing added financial stress to the already strenuous process of buying or selling property.
Whether someone bought a new house before selling their previous home and now can’t receive as much money as they were counting on to cover the new purchase, or if a lender’s appraisal is lower than the original purchase price, individuals are panicking when legally bound to a deal but no longer able to obtain a large enough loan to follow through with it.
What happens if I default on a home purchase?For those who do not have the ability to go through with the real estate purchase, a seller can take legal action and sue the buyer. The seller has the ability to obtain a judgment for the difference between the initial purchase agreement and a new purchase agreement with another buyer (known as the “Delta”), plus additional costs
Options for completing the closing sale to prevent a home purchase default
- Both parties work with their respective real estate agents to settle to lower the purchase price
- Both parties seek legal advice from professionals
- Consider a second mortgage, depending upon available cash flow
- Reach out to a co-signor or a family member to contribute towards the down payment
Dealing with resulting debt obligations? Let us help.If you find yourself in financial debt where the options above are not feasible, you can avoid bankruptcy by filing a proposal.
Our local Licensed Insolvency Trustees can review your options and assess your financial situation with a free confidential consultation. Reach out to one of our debt relief professionals to schedule your consultation or to discuss how the options above may be beneficial to you or your client.
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.