What happens if my Ontario home sells for less than my outstanding mortgage?

If your home sells for less than the outstanding mortgage balance — sometimes called being "underwater" or having negative equity — the sale proceeds will not be enough to discharge the mortgage in full. You are still personally liable for the remaining debt under your mortgage contract.

In Ontario, lenders can pursue you for the shortfall through the courts. This is different from some US states that limit a lender's ability to collect beyond the property value. Before closing, speak with your lender about your options: some lenders will negotiate a reduced payoff, especially if the alternative is a costly power-of-sale or foreclosure process.

If the shortfall is significant and you cannot cover it, you may need to explore options such as a consumer proposal or bankruptcy — both of which require consultation with a licensed insolvency trustee. Your real estate lawyer can coordinate with your lender on the discharge amount and make sure the numbers work before the sale closes, so there are no surprises on closing day. Never close a sale without confirming your mortgage payout figure in writing first.