Power of Sale in Ontario

If you have fallen behind on your mortgage and a letter from your lender has landed on the kitchen table, take a breath. Being in default is frightening, but in Ontario it is rarely the end of the road, especially if you act early. The single biggest factor in how this turns out is how soon you reach out for help.

This guide walks through how power of sale actually works in Ontario, the window you have to fix things, and the real options, from refinancing to a private mortgage to selling on your own terms, that can keep more of your equity in your pocket.

Mortgage Squad Advisors is licensed in Ontario under FSRA #13737. This is general information, not legal advice. Every situation is different, so please speak with a licensed mortgage professional and a lawyer about your specific circumstances right away. When you are ready, you can contact us or start a confidential application.

In Ontario, when a borrower defaults, lenders almost always use power of sale under the Mortgages Act rather than court-run foreclosure, which is rare here. Power of sale lets the lender sell the property to repay the mortgage without a court order, but only after statutory notice periods, so it does not happen overnight¹.

It typically unfolds like this:

• You miss payments and fall into default. Lenders may send reminders, or a demand letter, before anything formal begins.
• The lender serves a Notice of Sale. Where the mortgage contains a power of sale (most do), this notice can only be given once the default has continued for at least 15 days¹. It is typically sent to the owner and to others with a registered interest in the property, such as later mortgage holders; the Act sets out who must receive it and how.
• The notice period runs. The property cannot be sold until at least 35 days after the notice is given¹. The notice itself states the date after which the lender may sell and the amount needed to put things right.
• If nothing is resolved, the lender sells. The lender usually takes possession and lists the home for sale with a real estate agent, like any other listing. It is not a public auction.

You may hear the term “sheriff’s sale”. In Ontario that refers to a sheriff enforcing a court judgment under a writ of seizure and sale², not to a mortgage power of sale. If your mortgage has no power-of-sale clause, the Act’s statutory power applies instead, with at least 45 days’ notice¹. The earlier in this timeline you engage, the more tools are still available, so the moment you receive any formal notice is the moment to get advice.

Once a Notice of Sale is served, you have at least 35 days before the lender can sell, and you can stop the process at any point before a sale by paying the arrears and the lender’s costs¹. This is your opportunity to act, and it does not last forever.

In practice the window can be longer than the 35-day minimum, because listing and selling a home takes time, but you should never count on that. Your lawyer can confirm the exact dates in your notice. You can also ask the lender in writing for a statement of the arrears and expenses; the Mortgages Act requires the lender to answer within 15 days¹.

During the redemption window you generally have two ways to resolve things:

• Reinstate the mortgage by paying the arrears (the missed payments) plus the lender’s costs, bringing the loan current again.
• Pay out or refinance the mortgage in full, replacing the existing loan with a new one or with the proceeds of a sale.

Because the clock is already running, do not wait to see what happens. The sooner you understand your numbers, the more achievable these options become.

If you have equity in your home and your income can support a payment, refinancing is often the cleanest way out. A new mortgage can be structured to clear the arrears, cover the lender’s costs, and reset you with a single manageable payment, effectively curing the default.

Refinancing in a default situation usually depends on two things: how much equity you have built up, and whether a lender is comfortable with your overall picture. A bank refinance is capped at 80% of your home’s value³, and most banks will not refinance a mortgage that is in default. Even if a major bank has declined you, that does not mean every door is closed; alternative lenders assess these files differently.

Speed matters here. Arranging a refinance takes time for approval, legal work, and funding, so starting inside your redemption window, not at the end of it, gives the plan room to actually close. If you think you may have equity to work with, start an application and let a broker run the numbers with you.

When a traditional bank says no, that is frequently where a B-lender or a private mortgage comes in. These lenders focus more on the equity in your property and the exit plan than on a perfect credit score or recent payment history, which makes them better suited to default situations.

Common rescue structures include:

• A second mortgage registered behind your existing one, used to pay off arrears and buy you breathing room.
• A new private first mortgage that pays out the lender in default entirely, based largely on your home’s equity.
• A short-term B-lender solution that stabilizes things while you work toward qualifying for a lower-cost mortgage later.

These solutions carry higher rates and fees than bank financing, are usually short-term, and need a realistic exit strategy⁴. That is a fair trade-off to consider, because they can cost far less than losing your home and your equity in a lender-driven sale. The goal is almost always to use them as a bridge, then graduate back to mainstream financing once you are stable. A broker must disclose the fees and material risks of what they recommend in writing⁵, so you can decide with clear eyes. You can talk it through first.

Sometimes the right answer is to sell, and there is a meaningful difference between selling on your own terms and letting a lender sell the property for you. A homeowner-led sale, with proper preparation and time on the market, often nets more than a lender-driven sale aimed mainly at recovering the debt, and it avoids the lender’s enforcement costs being added to what you owe.

Here is the part that is easy to miss when fear takes over: in a power of sale, the proceeds go first to the costs of the sale, then to the lender’s interest, costs and principal, then to any later-registered mortgages or creditors in order of priority, and whatever remains belongs to you, the owner¹. The lender is not entitled to keep more than it is owed. If the sale price does not cover the debt, though, the lender can pursue you for the shortfall.

If selling looks likely, doing it proactively, before the lender’s process forces the timeline, gives you the best chance to maximize what you walk away with. A conversation early on can help you compare selling against refinancing side by side, so you choose the path that leaves you in the strongest position.

The answer to "when" is simple: now. Whether you have just missed a payment or already received a Notice of Sale, earlier always means more options and lower costs. Waiting is the one move that consistently makes things worse.

Two calls belong at the top of your list:

• A licensed mortgage professional, to assess your equity, your income, and which financing or sale strategy realistically fits your situation. You can check any Ontario broker’s licence with FSRA⁶.
• A lawyer, to confirm the dates in your notice, review the amounts claimed, and protect your legal rights throughout the process.

It also helps to call your lender directly. Lenders may be able to offer options such as a payment arrangement when payments become hard to make⁷. These conversations are confidential, and reaching out does not commit you to anything; it simply gets you the facts you need to make a calm decision. Mortgage Squad Advisors, FSRA #13737, can be that first call on the financing side and can help coordinate the rest.

Power of sale feels overwhelming, but it is a process with defined steps and, crucially, defined opportunities to step in. The borrowers who come through it best are almost always the ones who acted early, gathered the facts, and made a plan before the clock ran out.

You have more options than the situation may feel like it allows: reinstate, refinance, bridge with a private or B-lender solution, or sell on your own terms and keep your surplus. The right choice depends on your numbers, and the time to map them out is today, not at the end of your redemption window.

Please remember this guide is general information and not legal advice. For your specific situation, speak with a lawyer and a licensed mortgage professional right away. When you are ready, contact us for a confidential conversation or start an application. The sooner we talk, the more we can do.