- Sale proceeds go first to principal and interest owed, the expenses of the sale, and other encumbrances in order of priority, with any surplus going to the borrower.
- Your payout figure can include more than missed payments, so ask for a written breakdown of every line.
- A mortgagee must answer a mortgagor's s. 22(2) notice within fifteen days, or its rights to enforce are suspended.
- How costs are assessed or challenged depends on the facts, so have a lawyer review the figure before you pay or sign.
You expected to owe your missed payments. Then the payout figure arrived, and it included legal fees, sale costs and more interest than you expected. It is understandable to feel shocked, and to wonder whether every charge is legitimate.
This article explains in general terms where those charges come from, how they fit into a power of sale, and practical ways to question them. It does not set out every rule on how costs are calculated or reviewed, which depends on your mortgage and the facts, so a lawyer should review your figure.
Why the payout is more than your arrears
Once a lender starts a power of sale, you are no longer just behind on payments. What your payout figure includes depends on your mortgage and the facts, so it is worth confirming with a lawyer. If the sale proceeds, the money goes first to the principal and interest owed to the lender, the expenses of the sale, and other encumbrances in order of priority. Any remaining surplus goes to the mortgagor.
This means costs are paid ahead of any money coming back to you. The larger the costs, the smaller the surplus.
Interest also matters. Your mortgage contract sets the rate and when it applies, and your lawyer can check how interest has been calculated on the figure you were given.
Common line items to look for
Not every charge looks the same on a statement. Which categories appear on your figure depends on your mortgage and the facts. Borrowing against home equity can involve costs such as appraisal, title search, title insurance and legal fees. Reverse mortgages and similar products list their own possible costs, including appraisal, set-up, legal and closing fees, plus prepayment penalties. These show that costs vary by lender and product, so your own mortgage documents are the starting point.
- Expenses of the sale, if the sale goes ahead.
- Interest, which can keep growing while the balance is unpaid.
- Other encumbrances paid from proceeds in order of priority.
If you were behind on condominium fees, the picture can include more. A condominium corporation has a lien on the unit for unpaid common expenses, plus interest and reasonable legal costs and expenses of collection. Damages or costs awarded to a corporation against an owner, plus its additional actual costs of obtaining the order, are added to the common expenses for the unit.
The steps behind the costs
Understanding the process helps you see which charges may be connected to which step. Where the mortgage has a power of sale, the lender may sell once you have been in default for at least 15 days and at least 35 days' notice has been given to everyone with an interest in the property. If there is no power of sale clause, the statutory power of sale applies, after three months of default and 45 days' notice. The notice is made on Form 1, Notice of Sale under Mortgage.
The sale papers must also include a solicitor's declaration naming everyone entitled to notice and stating they were served, plus declarations of service. Work such as serving multiple parties is part of why a legal bill can grow.
| Step | Why it may add cost |
|---|---|
| Notice of sale (Form 1) | Form 1 is the prescribed form for the notice of sale |
| Sale papers | Solicitor's declaration and declarations of service |
| Sale | Expenses of the sale are paid from proceeds before any surplus |
| Condo arrears | Lien can include interest and reasonable legal costs of collection |
How to question the figure
Start by asking for a detailed written statement. A single total gives you nothing to check. You can ask what each part is for, and a lawyer can compare it with your mortgage terms.
There is also a formal tool. If you send a mortgagee a notice under s. 22(2) of the Mortgages Act, it must answer within fifteen days. If it does not, its rights to enforce the mortgage are suspended. The exact content of that notice and how it applies to your situation is something a lawyer should confirm.
If a figure looks too high, or you believe the process was not followed, a lawyer can advise you on your options. Because the rules on how costs are assessed depend on the facts and your mortgage, do not assume a number is final.
What to do next
- Request an itemized, dated payout statement in writing.
- Gather your mortgage, renewal documents, notices and any letters from the lender's lawyer.
- Compare each charge with your mortgage terms and ask what each one covers.
- Have a real estate lawyer review the figure before paying or signing anything.
- Ask about options to catch up, refinance or sell on your own, while you still have time.
Acting early generally keeps more choices open and can limit how much further interest and cost accumulate.
Frequently asked questions
Can a lender add its legal fees to what I owe?
Sale proceeds go first to the principal and interest owed and the expenses of the sale, before any surplus. Whether a particular charge is allowed depends on your mortgage and the facts, so have a lawyer review it.
Who gets the money if the home sells for more than I owe?
Proceeds go first to the principal and interest owed, the expenses of the sale, and other encumbrances in order of priority. Any remaining surplus goes to the mortgagor.
Can I make the lender explain its figure?
You can ask for an itemized statement, and a mortgagee must answer a mortgagor's s. 22(2) notice within fifteen days or its enforcement rights are suspended. A lawyer can help prepare the request.
Are condo arrears treated the same way?
Not exactly. A condominium corporation has a lien for unpaid common expenses plus interest and reasonable legal costs of collection. The lien expires three months after the default unless a certificate of lien is registered in that time.
Sources
- FCAC – Reverse mortgages — canada.ca
- FCAC – Borrowing against home equity — canada.ca
- Ontario.ca – Power of sale assignments — ontario.ca
- 2544176 Ontario Inc. v. 2394762 Ontario Inc., 2022 ONCA 529 — ontariocourts.ca
- Ontario.ca – Land Registration Bulletin 2003-1 Powers of Sale — ontario.ca
- O. Reg. 814/21 (Forms) – e-Laws — Ontario e-Laws
- CIBC Mortgages Inc. v. York Condominium Corporation No. 385, 2017 ONCA 542 — ontariocourts.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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