A cash sale only clears the arrears cleanly if it produces enough to pay out the mortgage, accrued interest, the lender’s collection and legal costs, and any other registered charges (property tax arrears, condo fees, second mortgages, builder’s liens). Whether that’s realistic depends on equity.
If the home has clear equity above what’s owed, a cash sale closes the file, ends the arrears, and returns the remaining equity to you at closing. This is the common case in most of Calgary, Edmonton, and Ontario’s GTA corridor — prices have risen substantially over the mortgage term, and two or three months of arrears barely move the payout figure relative to the equity sitting in the property.
If the home is roughly at break-even, the math can still work depending on the lender’s willingness to release the mortgage on receipt of the proceeds. A short-payoff arrangement — where the lender accepts less than the full balance — is a real option some lenders will consider when the alternative is a longer enforcement timeline and recovery costs they will never recoup.
If the home is underwater, a private cash sale usually doesn’t produce a clean exit. The honest answer is that a Licensed Insolvency Trustee or specialized mortgage counsel may be a better starting point. We’ll tell you that on the call rather than waste your time.
We work the math both ways before issuing an offer. If the file doesn’t pencil out, you’ll know in 24 hours and you haven’t lost any of your timeline.
