Ontario’s power of sale process has several consequences for the average homeowner. Understanding the process and what happens after the property is sold is essential. What happens after a power of sale can affect what you owe and credit score, so explaining your options is essential.
A power of sale allows a lender to sell a property after a legal process when the borrower has defaulted on the mortgage agreement. Several steps are involved, and the process can be started when the borrower misses one or more mortgage payments. Lenders can provide a notice or warning for a missed payment.
A mortgage agreement can also be defaulted on through a breach of a covenant. These can include intentionally damaging or using the property for illegal activities, not paying the taxes, or failing to insure it.
Once the process starts with a default, several other steps exist. It’s essential to remember that a borrower can fix a default before this notice is issued by catching up on missing payments, including fees and penalties and at any other time before the house is sold.
After a default, a lender must hold off for 15 days and then deliver a Notice of Sale. The Mortgages Act dictates who gets what in a registered letter. The notice goes to everyone shown as a guarantor or mortgagor, as well as to people with subsequent mortgages, execution creditors, and people with liens registered against the home or property.
There’s another waiting period after this gets mailed. It lasts 35 or 40 days if married people occupy the property before the lender can take further steps.
There is an official Redemption Period after the Notice of Sale is issued. During this period, a borrower must pay off the entire mortgage debt, including any legal fees the lender incurs. If the mortgage isn’t due, the borrower can bring it into good standing.
If they don’t pay the money owed before the Redemption Period (usually 35 days in the province of Ontario or 40 days if the property is occupied by a married couple) ends, the lender can proceed.
The lender can issue what’s called a Statement of Claim next. This statement needs to include some elements such as:
The Statement of Claim also needs to highlight the relief that the lender seeks. That’s repayment of what’s owed and outstanding costs. After that, the lender can sign a default judgment and bring a court motion to allow for a Writ of Possession.
Once issued by a court office, it can be delivered to a sheriff, who schedules a date to evict the homeowner and family. After the homeowners are evicted, the home is sold by a licensed realtor.
The money from the house sale is distributed in a specific way.
Last in line is the former homeowner. They get the residue from the proceeds that are left over after everyone else has been paid. Not only do these borrowers generally not get any of the proceeds after a power of sale, but another possible snag can see them owing the lender after the sale.
After the proceeds from a sale are distributed, there are usually minor or no proceeds left over for the homeowner. A mortgage lender who can’t recover the total investment amount can file a Writ of Execution to get the rest of the money.
Equifax reports that negative items like a power of sale can stay on your credit report for up to 6 years. That doesn’t mean you can’t start rebuilding your credit by doing several things like the following.
It’s important to remember a power of sale can affect the time it takes to rebuild a credit score. Equifax reports that it takes you less time to come back from a few heart inquiries or late payments than having something like a power of sale on your record.
So that’s why it is a good idea to look for some proactive solutions.
Several private lending solutions can give you the money to avoid a power of sale. Debt consolidation can free up some money so you can catch up on missed payments and costs. Private lenders can consolidate several high-interest debts, like high-interest credit cards, into a single loan with a monthly payment. These are based on your equity and the market value of your property.
One of the other financial solutions through a private lender that can stop a power of sale is a private second mortgage. Because these loans are based on the market value, you’ll need a proper property appraisal. Borrowers should know that any damage and repairs required can affect the final market value.
Jonathan Alphonso is a real estate professional who can supply a private mortgage, providing the money to stop a power of sale. Jonathan maintains mortgagebrokerstore.com and powerofsalesontario.ca. Reach him at 416-499-2122 or by email at ron@powerofsalesontario.ca.
jonathan April 4th, 2025
