Power of Sale in Ontario: Timelines, Rights, and How to Avoid It

In Ontario, if a homeowner falls behind on mortgage payments, the lender has a legal right to recover their money. One way they do this is through Power of Sale—a process that allows the lender to sell the property without going through a lengthy court foreclosure.

Power of Sale is faster and less costly than foreclosure, but it can still mean losing your home. For borrowers, understanding the timelines, legal rights, and ways to avoid Power of Sale is crucial to protecting your equity and financial future.

---

Power of Sale vs. Foreclosure in Ontario

Many Canadians confuse Power of Sale with foreclosure. The difference is important:

• Power of Sale: Lender sells the home, pays off the mortgage debt, and returns any remaining funds (equity) to the homeowner. This is the standard process in Ontario.
• Foreclosure: Lender takes ownership of the property and keeps all proceeds from a later sale. Foreclosure is rare in Ontario.

In short: With Power of Sale, you still have a chance to reclaim your remaining equity after the lender is paid.

---

How the Power of Sale Process Works

The process begins when a borrower misses payments. Lenders must follow strict rules under the Ontario Mortgages Act before selling the property.

Step 1: Default

• Typically triggered after 3 missed payments (but lenders can act sooner).

Step 2: Notice of Sale

• Lender serves a legal “Notice of Sale” after at least 15 days of default.
• This gives the borrower 35–45 days (depending on mortgage type) to catch up.

Step 3: Redemption Period

• During the notice period, you can pay arrears, legal fees, and costs to “redeem” the mortgage.

Step 4: Statement of Claim (if unresolved)

• Filed in court to recover debt and costs.

Step 5: Sale of Property

• Lender lists the home for sale on the open market.
• Must act in “good faith” to get fair market value.

Step 6: Distribution of Proceeds

• Lender recovers mortgage balance, interest, and legal costs.
• Any remaining funds go back to the homeowner.

---

Timelines of Power of Sale in Ontario

While timelines can vary, here’s a typical flow:

• Day 1–15: Mortgage payment missed, lender issues demand letter.
• Day 16–30+: Notice of Sale is served.
• Day 35–45: Redemption period (chance to catch up).
• Day 46+: Lender may proceed with Statement of Claim and prepare for sale.
• 3–6 months from default: Property can be listed for sale if arrears remain unpaid.

This means homeowners usually have a few months’ window to act before the property is sold.

---

Borrower Rights in Power of Sale

Even under Power of Sale, Ontario homeowners have rights:

• Right to Redeem: You can stop the process by paying arrears and costs before the sale closes.
• Right to Equity: After the mortgage and costs are paid, any leftover funds from the sale are yours.
• Right to Fair Sale: Lenders must attempt to sell at fair market value and cannot undersell intentionally.
• Right to Information: You are entitled to statements of arrears and legal costs.

---

How to Avoid Power of Sale

If you’re struggling with payments, early action is key. Here are practical strategies:

1. Talk to Your Lender Early
   Many lenders will work with you to restructure payments or offer temporary relief.
2. Refinance or Consolidate Debt
   If you still have equity, refinancing at a lower rate or consolidating debt can free up cash flow.
3. Consider a Private Lender
   For short-term solutions, private lenders may offer interest-only or flexible options—though at higher costs.
4. Sell the Home Yourself
   If keeping the home isn’t realistic, selling before Power of Sale allows you to control the process and maximize your equity.
5. Get Professional Advice
   Mortgage brokers, lawyers, and financial advisors can help explore alternatives before it’s too late.

---

Real-Life Example: John’s Story

John in Mississauga lost his job and fell behind three months on his $500,000 mortgage. His lender served a Notice of Sale, giving him 35 days to pay arrears of $9,000 plus $1,200 in legal fees.

By working with a mortgage broker, John refinanced with a new lender, used his equity to pay arrears, and avoided Power of Sale. Though his new rate was higher, it bought him time to stabilize financially and later switch back to a mainstream lender.

---

Key Takeaways

• Power of Sale is Ontario’s primary legal remedy for mortgage default.
• The process typically unfolds over 3–6 months, with several chances to redeem.
• Homeowners retain the right to equity after the lender is repaid.
• Acting early—through refinancing, negotiating, or selling—can prevent forced sale and protect your financial health.

---