If my lender sells my home and the proceeds don't cover the mortgage, what happens in Ontario?

If a lender exercises its power of sale in Ontario and the sale proceeds are insufficient to repay the outstanding mortgage balance plus the lender's costs, the difference — called a deficiency or shortfall — does not simply disappear. The lender generally has the right to pursue the borrower personally for the outstanding amount through a civil claim.

This is one of the most important distinctions between power of sale and foreclosure. In a foreclosure, the lender acquires the property and typically cannot also pursue the borrower for a deficiency. In a power of sale, the lender sells the property, applies the proceeds against the debt, and can sue for any remaining balance.

The lender's ability to recover depends on the borrower's financial situation. If the borrower has other assets, income, or property, a deficiency judgment can be pursued in court. Conversely, if the borrower has no assets, the practical recovery may be nil, though the judgment can remain against the borrower. If your home is being sold in a power of sale and you believe there will be a shortfall, speak with a lawyer immediately. There may be options — including negotiating a release of personal liability with the lender as part of a surrender or sale arrangement — that reduce or eliminate the deficiency risk.