How long do you actually have once a mortgage goes into default? For most homeowners who receive a notice of sale, that is the first question, and the answer is both better and worse than people fear. Better, because a lender in Ontario cannot simply take your home the day after a missed payment. Worse, because the time goes quickly and the costs keep climbing while it runs.
Mortgage trouble in Brampton often begins with something ordinary: a lost job, a separation, a renewal at a much higher rate, or a second mortgage that seemed temporary. Shame tends to delay the phone call. Unopened envelopes pile up on the kitchen counter, and options that were available in month two can be gone by month five.
This article offers general information about the Ontario process and is not legal advice. Your mortgage terms, the lender involved, and what has already been served on you will all affect your choices, so have the documents reviewed if you are in default.
Call Before It Becomes a Crisis
If you have missed a payment or know you are about to, contact your lender early. The Financial Consumer Agency of Canada advises borrowers in financial difficulty to reach out to their bank as soon as they can. Federally regulated banks are expected to consider relief for at-risk borrowers on principal residences. Depending on the lender and your situation, that could include a temporary payment arrangement, an adjusted amortization, or waived fees. Extending amortization lowers the payment but raises total interest, so look at the full cost.
Private lenders and mortgage investment companies are common on second and third mortgages in the GTA. They are not bound by the same federal guidance and their terms can be far stricter. Even so, a private lender may prefer a realistic repayment plan to the cost and risk of an enforcement sale. A frank proposal with actual numbers has a better chance than silence.
Whichever type of lender you have, get any arrangement in writing. A friendly phone call saying “don’t worry about it this month” will not protect you if the lender later says no such agreement was made.
What the Lender Can Do
A defaulting borrower generally faces several possible remedies, and lenders can often pursue more than one at the same time or in sequence:
- Power of sale. The lender sells the property without taking ownership. This is the most common route for residential mortgages in Ontario.
- Foreclosure. A court process that can end your ownership and the lender’s right to pursue you for more money. It is less common and usually slower.
- Suing on the covenant. Whoever signed the mortgage, including a guarantor, may be sued personally for the debt.
- Possession. The lender can seek a court order to take possession of the property, which often comes before a sale.
Most of what follows focuses on power of sale, because that is the process most Brampton homeowners will face.
The Timeline in a Power of Sale
Ontario’s Mortgages Act controls the sequence. Under section 32, where a mortgage contains a power of sale, the lender cannot give notice until default has continued for at least 15 days, and cannot sell until at least 35 days after notice has been given. If the mortgage has no power of sale clause, the Act supplies one, with different timing: a sale cannot take place until 45 days’ notice has been given, and the power itself generally arises only three months after default.
The notice must be in the prescribed form and given to more than just you. Section 31 lists people with an interest in the property, including those appearing on the parcel register and the execution index. Spouses with rights in the home and later mortgage holders may therefore get a copy. Expect the people around you to learn about the default, and consider telling them first.
A typical path looks like this:
- Missed payments and demand letters. The lender or its lawyer writes to you, often adding fees.
- Notice of sale. The redemption period begins and the notice states the amounts owing and the date by which payment must be made.
- Redemption period. Section 42 generally prevents the lender from starting further proceedings to enforce the mortgage until that period ends, subject to exceptions a court may allow.
- Action for possession. If you have not paid and remain in the home, the lender usually starts a court action. You will be served with a statement of claim, and the time to defend is short.
- Sale. After obtaining vacant possession, the lender lists the property, usually with a real estate agent.
The first three steps can move quite quickly, while the possession stage varies with the court’s schedule and whether a defence is filed. Do not plan around any particular number of months. If you are served with a claim, treat the response deadline seriously. Our page on real estate and mortgage litigation covers these actions more broadly.
Your Right to Put Things Right
Section 22 of the Mortgages Act is one of the most useful provisions for a borrower. Where default has made the entire balance come due, you may still, before a sale or before an action to enforce the lender’s rights is commenced, pay the arrears and the lender’s reasonable expenses and be relieved from the consequences of that default. The provision applies despite any contrary language in your mortgage. In plain terms, you may be able to restore the mortgage by paying what you are behind on rather than the full balance.
Section 22 has limits, and a lawyer should look at how it interacts with where your file stands and any acceleration of the debt. Once the term has matured, there is nothing left to “catch up,” because the full balance is now due by the passage of time. That is why borrowers near the end of a term can have much less room to manoeuvre, and why renewal letters should never be ignored.
You also generally have the right to redeem the mortgage in full by paying everything owing, including permitted costs, until the property has been sold under a binding agreement.
Check the Numbers
Default statements can include arrears, accrued interest, legal fees, appraisal or inspection costs, insurance, property tax paid by the lender, and various administrative charges. Ask for a detailed breakdown, and have someone check it against your mortgage and the law.
Two points deserve attention. Section 8 of the federal Interest Act restricts fines, penalties, and increased rates on arrears for mortgages on real property. A clause that hikes the interest rate on default can be vulnerable. And section 43 of the Mortgages Act gives you a route to have disputed costs assessed where you are paying the amount demanded. You should not assume every line on the statement is enforceable, but you also should not withhold payment on a hunch.
Any challenge to these amounts usually takes time you may not have. Bring the statement to a lawyer early.
Realistic Ways Forward
Different households will land on different solutions. The usual options include:
Refinance or bring in a new lender. A broker may be able to place a new mortgage that pays out the defaulted one, particularly if you have equity. Rates and fees can be steep. Read the terms closely and be cautious of short-term bridge loans that merely postpone the problem and shrink your equity.
Sell the home yourself. Often the most financially sensible decision if the arrears are beyond repair. A sale you control, with proper marketing, may yield a stronger price than an enforcement sale, and every month avoided saves interest and legal fees. Tell your lawyer and your lender what you are doing. A lender may hold off if a firm deal is in place, though it is not required to wait unless it agrees.
Negotiate. A forbearance agreement can give you a defined period to refinance or sell in exchange for specific commitments. Read these carefully. They frequently include admissions and releases that limit later arguments.
Insolvency advice. If your overall debt load is the real issue, a licensed insolvency trustee can explain consumer proposals and bankruptcy. These processes can help with unsecured debt, but they generally do not eliminate a secured lender’s rights against the house. Timing still matters, so speak with both a lawyer and a trustee.
Defend the action. Defending makes sense if there is a genuine dispute, such as a defective notice, a wrong amount, payments not credited, or questionable signatures. Filing a defence merely to buy time can add costs that are charged back to you.
After the Sale
A lender selling under power of sale must act in good faith and take reasonable steps to obtain fair value for the property. It need not hold out for the highest imaginable price. Section 36 of the Mortgages Act means a purchaser’s title is generally protected even if something went wrong with notice, but a person harmed by non-compliance can have a remedy against the party who sold.
Sale proceeds are applied in a set order, generally covering sale expenses, what is owed under the mortgage, and later registered interests. Any surplus goes to you. If the proceeds fall short, the lender may sue for the deficiency, and you may have grounds to challenge the sale if the price was improperly low. Keep the sale documents, appraisal references, and listing details you can obtain. Claims on a mortgage covenant can come with a limitation period longer than the two years people usually hear about, so a shortfall may follow you for a long time.
If your home has a basement tenant or other renters, section 48 of the Mortgages Act says a lender can obtain possession of a rental unit from a tenant only in accordance with the Residential Tenancies Act, 2006. Tenants may want separate advice, and they should keep paying rent to the right party and keep proof of it.
A Few Things to Avoid
- Ignoring mail or refusing registered letters. Notice can be effective whether or not you read it.
- Signing a quick deal with someone offering to “save your home” by taking title, a power of attorney, or a large fee. Get independent legal advice first.
- Moving out or handing over keys without understanding what that does to your rights and any liability that continues.
- Stripping fixtures or damaging the property. That can lead to further claims.
- Paying only one lender without understanding how that affects cross-defaults on other mortgages.
What to Bring to a Lawyer
Bring the notice of sale and every related letter, the mortgage commitment and registered charge, a recent statement, any statement of claim, a list of all mortgages and their balances, proof of recent payments, and a rough estimate of what the home might sell for. Also write down the dates you received each document and how they arrived. Those details often matter more than people expect.
If you are in Brampton or elsewhere in Peel Region, a member of our civil litigation team can review where you stand, and you can contact us to book a meeting. Default is stressful, but the process has rules and steps, and the earlier you look at them directly, the more of your choices remain open.