Power of Sale and Foreclosure in Ontario

Key Takeaways: A power of sale is not the end. If you’ve received a Notice of Sale, you still have time to act, but the window is limited. In Ontario, the typical redemption period is 35-40 days from the date of the notice. Private lender refinancing can often stop a power of sale even when banks won’t touch the file. Canadian Mortgage Services has helped homeowners save their homes in the vast majority of power of sale cases we’ve handled since 1988.

Receiving a Notice of Sale from your lender is one of the most stressful things a homeowner can experience. It means your lender has started the legal process to sell your home to recover the money you owe. But here’s what most people don’t realize: receiving a notice doesn’t mean your home is gone. You have options, and you have a limited but real window to exercise them.

What Is Power of Sale

Power of sale is a legal process that allows a lender to sell your property when you’ve defaulted on your mortgage obligations. In Ontario, this is the standard method lenders use (as opposed to foreclosure, which is more common in other provinces). The lender doesn’t need a court order to sell the property. Instead, the power of sale clause is embedded in most mortgage contracts from the beginning.

A lender typically initiates power of sale after a borrower has missed 2-3 consecutive mortgage payments, or when the mortgage has matured and the borrower can’t arrange new financing. It’s not something lenders do lightly. Most will attempt to work with you first, offering payment arrangements or extensions. Power of sale is the step they take when those efforts have failed.

The Power of Sale Timeline in Ontario

Day 1: Default notice. Your lender sends a formal notice that you’re in default. This typically happens after 2-3 missed payments or at mortgage maturity.

Day 15: Demand letter. If the default isn’t resolved, the lender sends a demand letter requesting full payment of all arrears (and sometimes the entire mortgage balance).

Day 35-40: Notice of Sale. The lender issues a formal Notice of Sale under the Mortgages Act. This gives you a redemption period (typically 35 days in Ontario, but it can be as short as 15 days depending on your mortgage terms) to pay the full amount owing.

After redemption period: Listing. If the redemption period expires without payment, the lender can list the property for sale. They’re required to get fair market value, but in practice, power of sale properties often sell below market.

The critical takeaway: the sooner you act, the more options you have. Don’t wait until the Notice of Sale arrives. If you’ve missed even one payment and can’t catch up, call us immediately.

Power of Sale vs Foreclosure

In Ontario, power of sale is far more common than foreclosure. In a power of sale, the lender sells the property and any surplus funds (after paying off the mortgage, legal costs, and arrears) go back to you. In a foreclosure (which requires a court order), the lender takes ownership of the property outright and keeps all proceeds. Foreclosure is rare in Ontario precisely because power of sale is faster and cheaper for lenders.

Your Options to Stop Power of Sale

Pay the arrears. If you can come up with the missed payments plus any legal costs the lender has incurred, you can bring your mortgage back into good standing. This is the simplest solution but requires having access to funds quickly.

Refinance with a new lender. This is the most common solution we arrange. A new lender pays off the existing mortgage in full, stopping the power of sale. The new mortgage may be through a B lender or private lender, with rates higher than what you had before, but the alternative (losing your home) is far worse.

Sell the property yourself. If refinancing isn’t possible and you want to control the sale rather than letting the lender sell at a potential discount, you can list and sell the property on your own terms. This typically gets you a better price than a lender-driven sale.

Negotiate with your lender. In some cases, lenders will agree to a payment plan, a temporary forbearance, or a loan modification. This depends entirely on the lender and your specific circumstances.

Refinancing to Save Your Home

When a homeowner is facing power of sale, banks won’t touch the file. They see the missed payments and the legal proceedings and walk away. That’s where alternative and private lenders come in. Private lenders focus on the equity in your home rather than your payment history. If you have at least 20-30% equity, refinancing is usually possible.

Here’s a real-world scenario: You own a home worth $650,000, owe $380,000 on your first mortgage, and have missed 4 payments. The lender has issued a Notice of Sale. A private lender could refinance the $380,000 plus arrears and legal costs (say $395,000 total) at 10% on a 1-year term. Your monthly interest payment would be approximately $3,290. It’s more than your previous payment, but you keep your home, stop the power of sale, and have 12 months to stabilize your finances and move to a better lending option.

Time is critical. Call us at 905-455-5005 or contact us online the moment you realize you can’t make your payment. The earlier we get involved, the more options we have.

What Happens After Power of Sale

If the power of sale proceeds and the property is sold, the sale proceeds are applied in this order: first mortgage balance, legal and selling costs, any second mortgages or liens, and any remaining surplus goes to you. If the sale doesn’t cover the full amount owing, the lender can pursue you for the shortfall through a deficiency judgment.

A power of sale on your record will impact your credit significantly, making it harder to borrow for several years. This is why refinancing or selling on your own terms is almost always the better outcome.