- A lender cannot give notice of power of sale until the default has continued for at least 15 days, and the sale cannot happen until at least 35 days after the notice.
- Before the sale, a borrower in default may get relief by paying the arrears, or fixing the broken promise, plus the lender's necessary expenses.
- Sale proceeds go to expenses, interest and costs, principal and later lenders in order, and any surplus is paid to the borrower.
Receiving a notice that your lender intends to sell your home is frightening, and the paperwork can be hard to follow. The good news is that Ontario law sets a timeline and gives you a way to stop the process in many cases. The key is to act early and to understand the dates.
Power of sale is the right in a mortgage that lets a lender sell the property to recover what is owed if you default. This article walks through the minimum timelines, how redemption works and what happens to the money.
What power of sale means
Most mortgages let the lender sell the home if you fall into default. Default usually means missed payments, but it can also mean breaking another promise in the mortgage, such as keeping the property insured or paying property taxes. A power of sale is a way for the lender to recover what you owe by selling the home, with the sale following a notice process set by the Mortgages Act.
Lenders can have other options, such as going to court, so your mortgage document and a lawyer can confirm which route applies to you.
The timeline: minimum periods
Under the Mortgages Act, a lender may not give notice of power of sale until the default has continued for at least 15 days. The sale cannot take place until at least 35 days after the notice is given.
| Step | Minimum under the Mortgages Act |
|---|---|
| Default continues before the lender may give notice | At least 15 days |
| Time between notice and the earliest sale | At least 35 days |
These are floors, not guarantees of how long the process will take. Your mortgage document may set longer periods, so read it closely and check the dates on the notice you received. Read every date and amount on the notice carefully, and keep the envelope or email it came in.
Stopping the sale: redemption
A borrower in default may get relief before the sale by paying the amount in arrears, or by performing the broken covenant, plus the lender's necessary expenses. A covenant is simply a promise in the mortgage. What you pay for relief is the amount in arrears plus the lender's necessary expenses, so ask for the exact figure in writing.
- Ask the lender for a written statement of the arrears and the expenses added so far.
- Check what the mortgage says about the cost of lawyers and notices.
- If the problem was something other than missed payments, such as unpaid insurance, find out what must be fixed.
- Pay in a traceable way and keep proof of payment.
If you cannot pay the arrears in one amount, a lawyer can help you understand your choices, such as talking to the lender about a payment plan, refinancing, or selling the home yourself on your own timeline. None of these is guaranteed, and the outcome depends on the lender and your facts.
Where the sale money goes
Under the Mortgages Act, power of sale proceeds go first to the expenses of the sale, then to interest and costs, then to principal, and then to later encumbrancers in priority order. Any surplus is paid to the borrower. A later encumbrancer is someone else with a registered claim against the property, such as a second lender.
If the sale price is more than you owe, you could receive a surplus. If it is less, how that affects what you may still owe depends on your mortgage and your situation, so it is worth confirming with a lawyer early.
Do not confuse it with a tax sale, and what to do next
A municipal tax sale is a different process. A municipal treasurer may register a tax arrears certificate if any part of the tax arrears is still owing on January 1 in the second year after the year the taxes became owing. The owner or anyone else can stop a tax sale by paying the cancellation price within one year of registration, and if it is unpaid when the year ends, the land is offered for sale by public auction or tender. A municipality may also make an extension agreement giving more time to pay the cancellation price, and while that agreement is in force, the time is not counted toward the tax-sale periods. Your mortgage lender is not the same as the municipality, so check who sent the notice.
- Read the notice and note the date it was given and the date of the earliest sale.
- Request a written payout or arrears figure from the lender.
- Gather your mortgage, recent statements and any letters from the lender.
- List other debts and any other registered claims against the home.
- Speak with a lawyer promptly, before the earliest sale date.
- Do not ignore mail from the lender or its lawyer.
Frequently asked questions
How long do I have after I get a notice of power of sale?
The sale cannot take place until at least 35 days after the notice is given. Your mortgage may set a longer period, so check the document and the notice.
Can I keep my home if I catch up on payments?
A borrower in default may get relief before the sale by paying the amount in arrears, or performing the broken covenant, plus the lender's necessary expenses. Confirm the exact amount in writing.
What happens if the home sells for more than I owe?
Proceeds go to sale expenses, then interest and costs, then principal, then later encumbrancers in priority order, and any surplus is paid to the borrower.
Can the lender go to court instead?
Lenders may have other ways to enforce, including court action, depending on the mortgage and the situation. A lawyer can confirm which options apply to your mortgage.
Sources
- Mortgages Act (e-Laws) — Ontario e-Laws
- Municipal Act, 2001 (e-Laws) — Ontario e-Laws
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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