The short answer
When a mortgage is in default, Ontario's Mortgages Act and most mortgage contracts allow the lender to sell the property to recover what is owed. The lender doesn't need a court order to take ownership; the homeowner keeps title until the sale closes. After the sale, the proceeds pay the mortgage, the lender's legal and sale costs, and any other registered debts, and any remaining surplus generally goes back to the homeowner.
How the process generally works
- Default. One or more payments are missed, or another term of the mortgage (such as property taxes or insurance) isn't met.
- Lender contact. Most lenders send reminder and demand letters first. Many wait until a mortgage is one to three months behind before formal steps.
- Notice of Sale. Once a payment is at least 15 days in default, the lender can serve a Notice of Sale under the Mortgages Act. It must give at least 35 days before the lender can sell.
- Possession. If the default isn't resolved, the lender may start a court action (a Statement of Claim) for possession and the amount owed.
- Listing and sale. The lender lists and sells the property and must take reasonable steps to obtain fair market value.
- Distribution. Proceeds are paid out in priority, with any surplus generally going to the homeowner.
See the general timeline for how long each stage tends to take.
Power of sale vs. foreclosure
| Power of sale | Foreclosure | |
|---|---|---|
| How common in Ontario | Standard process | Rare |
| Court involvement for title | Not required | Court order transfers ownership |
| Surplus after sale | Generally returned to the homeowner | Lender usually keeps the property and any equity |
| Typical length | Often several months | Usually longer |
Your rights during power of sale
- To bring the mortgage back into good standing. During the notice period, the Mortgages Act generally allows a homeowner to pay the arrears plus permitted costs and continue with the mortgage.
- To redeem. Until the lender has a binding agreement of purchase and sale, you can usually pay the mortgage off in full, for example, through a refinance or your own sale.
- To a fair process. The lender must give proper notice and act in good faith to obtain fair market value.
- To any surplus. Money left after the mortgage, costs and other registered debts are paid generally belongs to you.
Why acting earlier helps
Not because something terrible happens overnight, but because each stage adds legal and enforcement costs to the balance and narrows the time available to arrange financing or a sale. Starting the conversation early simply keeps more options on the table. Explore them on Your Options When You're Behind.