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Understanding the Mortgage Power of Sale Process in Ontario

Writer's picture: 519HB519HB

In the last several weeks, we have seen more homeowners reach out to us and ask about what happens if they can't meet their mortgage payment requirements. While we never provide legal advice, our goal is to provide our clients with relevant and current information so they can make informed choices. If you have any questions about selling your home, please reach out to us.


The information we are providing in our blog post is intended to give you a summary of the power of sale process in Ontario and for specific legal questions, contact a law firm that specializes in real estate law.


Video: Explaining the Power of Sale Process in Ontario





The Power of Sale Process in Ontario


Power of Sale is a legal remedy that enables a mortgage lender to sell a property when the borrower defaults on their mortgage. This process is defined under the Ontario Mortgages Act and is commonly included as a standard term in mortgage agreements.


The electronic version of the Act and the accompanying regulations can be found on the Ontario Government's e-Laws portal.


The Toronto Star published a recent post on the rising rate of power of sales in Ontario:


Homeowners who bought during the pandemic when interest rates were ultralow are beginning to renew their mortgage and can’t pay the increased monthly borrowing costs, experts say. Many bought property they couldn’t afford, and are now over-leveraged, unable to pay their other mounting debt.


However, it is not time to ring the alarm bells as there are some signs of optimism outlined in the article:



Steps in the Power of Sale Process


Default Notice: The process begins when the borrower defaults on their mortgage. A default can occur due to missed payments, failure to pay property taxes, or breaching other terms of the mortgage agreement.


Notice of Sale: After the default, the lender must issue a Notice of Sale to the borrower. This notice typically gives the borrower 35 days to pay the overdue amount, including interest and legal fees, to reinstate the mortgage.


Redemption Period: During the 35-day redemption period, the borrower can pay the outstanding arrears to stop the Power of Sale process. If the borrower fails to do so, the lender can proceed with selling the property.


Listing the Property: If the borrower does not remedy the default, the lender can list the property for sale. The lender must ensure the property is sold at a fair market value, taking reasonable steps to advertise and sell the property.


Sale of the Property: Once a buyer is found, the property is sold. The proceeds from the sale are used to cover the outstanding mortgage debt, legal fees, and other costs incurred by the lender. Any remaining funds are returned to the borrower.


Homeowner Rights


Even during the Power of Sale process, borrowers have certain rights. They can redeem the mortgage by paying off the outstanding amount at any time before the sale is finalized. Additionally, if the lender does not follow the proper procedures or fails to obtain a fair market price, the borrower may have grounds to challenge the sale.







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