Mortgage Arrears & Power of Sale
If you have missed mortgage payments, or a letter has arrived that mentions a power of sale, the most useful thing to know is that you almost certainly have more time and more options than the letter makes it feel. The second most useful thing to know is that both shrink every week you wait.
You can call us on 416-281-9628. If you would rather read first, this page explains what the process actually is in Ontario and what can still be done at each stage.
What happens, and roughly when
Ontario lenders usually use power of sale rather than foreclosure. In broad terms:
- Missed payments. Collection calls and letters. Nothing is registered yet, and this is by far the cheapest point at which to fix things.
- A Notice of Sale under the Mortgages Act. A lender cannot issue this until the default has continued for at least 15 days. It sets out what you owe, including costs.
- A redemption period. The lender generally cannot complete a sale until at least 35 days after that notice. Through this window you can still redeem — pay the arrears, interest and the lender's costs — and the mortgage continues as though nothing happened.
- Listing and sale. After the notice period the lender may take possession and sell. You remain the owner until a sale actually closes, and you can still refinance or sell it yourself up to that point.
- After the sale. Proceeds pay the mortgages, interest, legal and selling costs in order of priority. Anything left is yours. If there is a shortfall, you still owe it.
These are the general statutory timelines, not a promise about your file: the exact dates, the amounts and your rights depend on your mortgage and on what has already been served. Get a real estate lawyer to read your documents. That is not a disclaimer, it is the first thing to do.
What can be done
In rough order of what it costs you:
- Reinstate the mortgage. Pay the arrears and costs and the default is cured. Where the money can be found — family, a small second charge, liquidating something — this is the cheapest outcome by a wide margin.
- An arrangement with the lender. Some will capitalise arrears or allow a short deferral, particularly where the cause has passed and you can evidence it. It is always worth asking, and better asked early.
- Refinance away from the lender. An alternative or private lender pays out the mortgage in default, including the arrears and legal costs, and gives you a term to recover in. This works on equity, not on income or credit, so it is available to people a bank has already turned down. It is the most common way a power of sale is stopped.
- A second mortgage large enough to clear the arrears, leaving your first mortgage untouched.
- Sell it yourself. If the equity is thin or the payment was never affordable, an ordinary sale on the open market almost always nets more than a lender's sale, because you control the timing, the presentation and the price. Choosing this early is a decision; being pushed into it late is not.
What rarely helps is doing nothing. Interest, legal fees and the lender's costs are added to what you owe, so the equity that would have funded any of the options above is consumed while the file sits.
If there is equity, there is usually a way
The question that decides most of these files is simple: what is the property worth, and how much is owed against it? Where there is meaningful equity, a lender can almost always be found to refinance a mortgage in arrears — at a cost, for a short term, with a plan to move on afterwards. Where there is little or no equity, the honest conversation is about selling on your own terms rather than the lender's.
We will tell you which of those two you are in on the first call, rather than taking an application either way.
If a notice has arrived, call today rather than next week
Fifteen minutes is enough for us to tell you whether this is stoppable and what it would take.
Speak to a brokerOr call 416-281-9628
Common questions
How many payments can I miss before this starts?
A lender can begin the process once a default has continued for 15 days, though in practice most move later than that. Do not treat the gap as spare time — act at the first missed payment, when the cheapest options are still open.
Can I stop a power of sale once it has started?
Frequently, yes. Paying out the arrears and costs within the redemption period ends it, and refinancing the whole mortgage ends it at any point before a sale closes. The practical limits are time and equity.
Will I lose everything I have paid into the house?
No. After a sale the proceeds clear the mortgages, interest and costs, and any surplus is yours. The reason to act early is that each month of interest and legal costs reduces that surplus.
What if the sale does not cover what I owe?
The shortfall remains a debt you owe, and a lender can pursue it. This is one reason selling on the open market yourself is usually better than letting a lender sell.
Does this ruin my credit permanently?
It does serious damage, and it is not permanent. Missed mortgage payments and a power of sale will sit on your report for years, but people refinance, rebuild and buy again — see mortgages with bruised credit. Stopping the default early limits the harm.
Should I speak to a lawyer as well as a broker?
Yes. A broker arranges financing; a lawyer tells you what the notice you have been served actually requires and by when. On a file like this you want both, and the lawyer first if a notice has already arrived.
This page is general information about Ontario practice and is not legal or financial advice. Statutory periods, your rights and the amounts required depend on your mortgage and on the notices served — obtain independent legal advice on your own documents. Pegasus Mortgage Lending Center Inc., Brokerage, FSRA Licence #11479.
