Can a Mortgage Lender Refuse to Renew Your Mortgage in Ontario?

You have a missed payment or a change in income, and your lender has told you it will not renew your mortgage when the term ends. That is stressful, but it does not mean you lose the home at the end of the term.

This article explains how renewal differs from enforcement, what Ontario law says about arrears and notice, and what options you may have, including relief from your lender or moving to a new lender.

Renewal is a lender decision, enforcement has rules

At the end of a mortgage term, the lender decides whether to offer new terms. Whether it must do so depends on your mortgage contract and the lender, so read your mortgage documents and ask the lender to give you its reasons in writing. A lawyer can confirm what your contract requires.

Some mortgages are meant to be short. Private mortgages are generally a short-term option, often for one or two years, and are often interest-only, so a private lender declining to renew is a real possibility to plan for.

Refusing to renew is different from enforcing the mortgage. If the lender wants to sell the home under a power of sale, the Mortgages Act sets out steps the lender must follow.

If you are behind on payments

Despite any agreement to the contrary, a borrower in default can stop the lender from enforcing the acceleration clause by paying the amount due under the mortgage, meaning the arrears and not money that is only due later, plus the lender's necessary expenses.

You can also give the lender written notice requiring a written statement of the arrears and expenses. The lender must answer within 15 days, and if it fails to do so without reasonable excuse, or gives an incomplete or incorrect answer, its enforcement rights are suspended until it complies.

Check the charges added to your arrears. No fine, penalty or rate of interest may be charged on arrears that increases the charge on the arrears beyond the rate payable on principal not in arrears.

What a power of sale involves

Where a mortgage contains a power of sale, the lender cannot give notice of exercising it until the default has continued for at least 15 days, and cannot sell until at least 35 days after the notice is given. The notice goes to every person having an interest in the property.

Once a notice of sale has been given, the lender cannot start any further proceeding to enforce the mortgage until the time in the notice has passed, unless a Superior Court judge permits it. A lender selling must also take reasonable precautions to obtain the true market value of the property at the date of sale.

Relief and other ways forward

Ask your lender what it can offer. Options a lender may offer include:

• Blend-and-extend, capitalizing missed payments, or interest-only payments for a limited time.
• A sale-by-borrower plan, where you sell at fair market value and can usually stay up to 90 days.
• A payment deferral, which is an agreement and not a right. It usually lasts up to 4 months, interest keeps accruing and is usually added to the principal, so you will owe more afterwards.

Federally regulated lenders are expected to give tailored relief to borrowers at risk of default on their principal residence, and your express consent is required. That expectation applies to banks and other federally regulated lenders, and only for an existing residential mortgage on your principal residence, so provincially regulated and private lenders are not covered by it.

Moving to another lender and what to do next

If you move your mortgage before the term ends, you may owe a prepayment penalty, usually the higher of 3 months' interest on what you still owe or the interest rate differential. Mortgage brokerages, brokers and agents in Ontario are licensed by FSRA, and you can check a licence on FSRA's public listing. A brokerage must take reasonable steps to make sure a mortgage it presents suits your needs and circumstances.

• Get the lender's refusal and its reasons in writing.
• Request a written statement of arrears and expenses.
• Ask about relief options before the term ends.
• Check any broker's licence before sharing financial details.
• Speak to a lawyer if you receive a notice of sale.

Frequently asked questions