For most homeowners, receiving notice that their mortgage is in default can be a stressful and confusing experience. In Ontario, the most common remedy available to a lender is a power of sale, which allows the lender to sell the property if the borrower fails to meet their mortgage obligations. Contrary to what many people believe, the lender does not immediately take ownership of the home. Instead, the lender follows a legal process that gives the homeowner an opportunity to correct the default before the property is sold.
The process usually begins when the homeowner falls behind on mortgage payments or breaches another term of the mortgage agreement. After the default continues for a period of time, the lender may issue a formal Notice of Sale Under Mortgage. This notice sets out the amount required to bring the mortgage back into good standing and provides a redemption period during which the homeowner can resolve the default. During this time, interest, legal fees, and other costs may continue to accumulate, making it important to act quickly.
A simple example can help explain the process. Imagine a homeowner loses their job and misses several mortgage payments. The lender eventually issues a Notice of Sale requiring payment of the arrears and associated costs. If the homeowner is able to obtain new employment and pay the overdue amount before the redemption period expires, the mortgage can often be reinstated and the power of sale process stops. If the default is not corrected, however, the lender may list the property for sale and use the proceeds to repay the mortgage debt and enforcement costs.
The good news is that homeowners often have several options available before a sale occurs. They may be able to negotiate a payment arrangement with the lender, refinance the mortgage with another financial institution, obtain assistance from family members, or voluntarily sell the property themselves. In some situations, lenders are willing to discuss temporary payment relief or other solutions if the homeowner communicates early and demonstrates a realistic plan to address the arrears. Ignoring notices and correspondence from the lender generally reduces the available options and increases costs.
The most important tip for homeowners facing a potential power of sale is to act as soon as possible. Contact the lender, review your finances, and seek professional advice from a lawyer, mortgage professional, or financial advisor if needed. A power of sale does not happen overnight, and there is often an opportunity to resolve the problem before the property is sold. By understanding the process and responding promptly, many homeowners are able to bring their mortgage back into good standing or find an alternative solution that protects their financial interests.
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