Everyone pretty much knows what a mortgage is and how it works. This is a type of loan that helps you pay for a home. In this process, a property is used as collateral; in the event that you cannot pay up or miss a number of payments, your lender can take your home.

Of course, no one wants this to happen. No one wants to lose a home. And because of this very huge risk, a mortgage is considered as one of the most important financial decisions that you make throughout your life. You surely don't want the dreadful thing called "foreclosure" to happen.

So what is foreclosure and how is the process carried out?

The Missed Payments

In any mortgage agreement, you promise to pay a certain amount of money for a specific period of time. You need to do this on a regular basis. When you miss fulfilling your end of the bargain, you are putting yourself - and your home - in danger.

Usually, the first instance of nonpayment would not merit a notice. Banks typically wait for 3 to 6 months of nonpayment before they take an action.

The Notice of Default

The foreclosure process begins when your bank files a Notice of Default. This is done through a trustee. This notice informs you as well as the county that your property has entered into "pre-foreclosure." The trustee also has the responsibility of contacting you, the homeowner, and informs you about the state of your mortgage - Toronto or elsewhere - and the options available to you.

During this stage, expect such a notice to be posted on your property or even the local newspapers.

The Notice of Sale

If after a considerable amount of time, you don't do anything about your mortgage, then the trustee will file a Notice of Sale. Obviously, this implies that the property is now for sale and that biddings are already accepted.

Some state laws require banks and other mortgage lenders to go to court before any property up for foreclosure is to be sold. When this is the case, the trustee is once again given the responsibility to contact you and inform you of your required appearance on court. If you don't show up, then you will lose the right to fight for your property.

After this court hearing, the sale goes on as planned. The property in question goes to the Sheriff's Auction and bidding starts. Usually, the remaining balance of the mortgage serves as the starting bid. As with any other auction, the highest bidder gets the property. When no bidder bids high enough to meet the minimum requirement, then the property is purchased by the trustee and it becomes a "bank owned property."

Foreclosure is lengthy and taxing process. Because of this, banks and other mortgage lenders try to stay away from this procedure as much as possible. In every phase of the process, an effort to give you the chance to get back on the track of your mortgage - Woodridge or elsewhere - is exerted. After all, it's not really a nice thing to take someone else's home, business or no business.

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