Behind on your mortgage in Ontario: what happens next, and what you can do at each stage

Behind on your mortgage in Ontario? Here is where you actually stand

If you have missed a mortgage payment, or a Notice of Sale has arrived, the house is not already gone. But the useful options narrow as the file moves forward. The clock is set by statute, not by how reasonable your lender is feeling, and every week that passes can close a door that was open the week before.

I am Paul Franchi, a Licensed Insolvency Trustee in Ontario, and a lawyer by training. A mortgage problem can reach a trustee after the house has been sold, when what remains is a letter saying how much the person still owes. This page is written for the earlier moment, when there is still something to decide. It walks the whole road, from the first missed payment to the day the house is sold and past it, and at each stage it tells you what you can actually do and what it will really cost.

A mortgage problem can arrive alongside pressure from credit cards, lines of credit and loans. Put those balances beside the mortgage when you work out what the household can carry; keeping one bill current does not tell you whether the whole budget works.

If you only read one section, read the one that matches where you are. If you have just been served, go to the Notice of Sale section. If the house is already sold, go to the end.

Find the stage you are in

Swipe sideways to see the whole table.

Do not wait for one professional to solve every part of the file. A difficult mortgage problem may need a broker, lawyer and trustee working on different questions at the same time.

What happens after you miss a mortgage payment?

One missed payment does not put your house up for sale, but it starts a clock. Work from the legal minimums below while you ask the lender what it intends to do.

A missed payment is a default under your mortgage. So is failing to pay the balance when the term ends without a renewal, or breaking another term of the mortgage. From that moment your lender has the right, written into the mortgage and into Ontario’s Mortgages Act, to move toward selling the property without going to court. That right is called power of sale, and what actually happens in a power of sale in Ontario is set out in full on this site’s guide to it. This page is about the decisions you face at each step.

The minimum periods below are the ones to plan around. How much time a lender gives you above the applicable minimum is the lender’s choice. Ask what it intends to do, but do not assume an extension that has not been agreed.

The phrase you will hear is “mortgage arrears”. It means the payments you have missed, plus the interest and charges that attach to them. Arrears grow every day they are not paid. That is the first cost of waiting, and it is the smallest one.

What if my mortgage renewal was denied, or I can’t afford the new payment?

A lender does not have to renew you, but a refusal from one lender is not the end of the mortgage market, and it is not the moment to sign with the first private lender who says yes.

The law does not force a lender to offer a new term when the old one ends. A lender can decline to renew, or can offer terms you cannot carry. When that happens, three moves exist. You can pay the mortgage out, including by switching to another lender if approved. You can ask the existing lender for a different arrangement. Or you can enter the alternative mortgage market, where lenders take borrowers the banks decline, at higher rates, lower loan-to-value limits and additional fees. A mortgage broker can help compare those offers. A lender does not have to renew. If it will not, and you cannot pay the balance, you are in default the day the term ends, and the same clock runs as if you had missed a payment.

Before accepting a replacement mortgage, compare its interest, lender and broker fees, legal costs, default charges and renewal terms with the loan it would replace. Put the monthly payment beside your income and essential spending, and write down how the balance will be repaid when the new term ends. A loan can postpone the decision while adding to the amount you owe.

Renewing, switching and refinancing during and after a consumer proposal have their own rules, and those are set out on Mortgages and a Consumer Proposal: Renewing, Refinancing, and Buying a Home. This page stays with the renewal that has already been refused.

What is a Notice of Sale, and how long do I have after one?

The law sets a minimum, and the minimum is short. Under a mortgage that contains a power of sale, which nearly all do, a lender cannot give a Notice of Sale until your default has lasted at least fifteen days, and cannot sell until at least thirty-five days after the notice is given. Those are floors, not ceilings. Nothing stops a lender taking longer, but you should plan on the floor, because the lender is entitled to it.

A Notice of Sale is not a lawsuit, a judgment or a seizure. It is the formal warning the Mortgages Act requires before a lender can exercise power of sale. It does not transfer your title and it does not, on its own, create a new debt. What it does is start the thirty-five days.

Two protections come with it. During those thirty-five days you can stop the sale by paying what the notice demands, and the lender must take your money if you pay on the terms the notice sets. And once a notice is given, the lender generally cannot start a separate court action on the mortgage without a judge’s permission. The law keeps it to one lane at a time. Both of these are in the guide with their section numbers.

One thing to check the moment the notice arrives: how it was served. The Mortgages Act says how a notice must reach you, and a notice that did not follow the rules is a notice a lawyer may be able to challenge. That is not a way to make the debt disappear, but it can be a way to buy the time you need.

What will it cost to bring the mortgage back into good standing?

More than the missed payments, and more every day.

The figure you need to pay to stop the sale is often called the redemption figure. It is not just your arrears. It includes the interest that has kept running, the lender’s costs of the notice and the enforcement so far, and, with a private lender, the default-rate interest and the fees the mortgage lets the lender add. Ask for the figure in writing, itemized, and ask for it early, because it grows while you decide.

With a private lender, the default rate and the fees the mortgage allows can be the largest part of it, and they are exactly the charges that deserve a second look. Have a lawyer check the charges against the mortgage and the accounting; the guide explains the questions to ask.

If you can pay the redemption figure, pay it, and get a written statement afterward confirming the default is cured. If you cannot, the rest of this page is for you.

Can I just ask my lender for more time?

You can ask for more time. Make the request with a budget, the reason for the shortfall and a date by which you expect to catch up. Get the answer in writing before treating any pause as part of your plan.

A bank or credit union may have a hardship process. Ask whether your documented short-term problem qualifies for a payment arrangement or a pause. No law makes a private lender give you time. A bank may have policies on hardship, and asking costs nothing, but nothing obliges a private lender to say yes.

Read the default rate and fees in any private mortgage while you ask for time. Those charges can continue while you decide. Ask for the exact payout figure and compare a repayment arrangement, a replacement loan and a sale, instead of building the plan on an extension that has not been agreed.

Should I refinance?

Compare the full cost, the payment you can carry and a realistic plan to repay the balance. A replacement loan may change the timing of the problem without solving it. The useful question is whether its terms work for your household, including what happens if the plan takes longer than expected.

Refinancing means replacing your mortgage with a new one, sometimes to clear arrears or change the payment. Ask a broker which lenders will consider your actual income, debts, credit and property. For every offer, put the interest, lender fee, broker fee, legal costs, renewal fee and default charges on the same page. An advertised rate is only one part of that comparison.

Before you sign, compare the total first-year cost and the balance due at the end of the term. A lower monthly payment can come from a longer repayment period, and a higher-cost loan needs a clear reason and an affordable exit. Include the option of selling, and the effect of dealing with other debts, in the same household calculation.

Should I sell the house myself instead of letting the lender sell it?

If the house has to go, compare a voluntary sale with the likely net proceeds and costs of lender enforcement while you still have choices about the agent, price and timing.

The thirty-five days after the notice is the window the law guarantees you. After that, whether you can still redeem depends on whether the lender has already signed a sale, and once it has, assume the door is closed and act on that. Selling yourself means you choose the agent, the price and the timing, and the proceeds pay the mortgage, the arrears and the costs, with whatever is left coming to you. For the enforcement alternative, ask for the lender’s payout figure and estimated charges, and have a lawyer check the accounting.

The arithmetic that decides this is the equity. Take what the house would realistically sell for, subtract every mortgage on title, the arrears, the selling costs and the lender’s charges, and look at what is left. If the number is positive, you are selling to keep your equity. If it is negative, you are selling to limit a shortfall, and the shortfall is the subject of the section after next.

Where does a consumer proposal or a bankruptcy fit?

Filing with a Licensed Insolvency Trustee will usually not stop a power of sale that is already running, but it can be the difference between keeping the house and losing it when the mortgage is current and everything else is not, and it changes what you owe afterward if the house is lost.

Who these remedies are for. Everything on this page about a consumer proposal or a bankruptcy applies to a person who is genuinely insolvent under the Bankruptcy and Insolvency Act: someone who cannot pay their debts as they come due, or who owns less than they owe. That is not a formality. It is the first thing I assess, and the law requires me to. If you are not insolvent, these are not your remedies, and arranging your affairs to look insolvent when you are not is the worst thing you can do: the Act lets a trustee reverse payments and transfers made before a filing, the Official Receiver examines a bankrupt under oath about the causes of the bankruptcy and what happened to the property, and a discharge can be opposed on exactly those facts. I am bound by my Code not to assist anyone down that road, and I will not.

Here is the honest position, stated exactly as the guide states it. When you file a consumer proposal or a bankruptcy, a stay of proceedings stops most of your creditors at once: the collection calls, the lawsuits, the wage garnishments. For unsecured debt it is powerful. A mortgage is different. The Bankruptcy and Insolvency Act expressly leaves a secured lender free to carry on, and a court can pause a mortgage lender for at most six months, and never past the date the mortgage falls due, on an application you should not plan around.

So what does filing do? Two things, in two different situations.

If your mortgage is current and the pressure is coming from everything else, then, for a household that is insolvent, a consumer proposal deals with the unsecured debt that is squeezing the mortgage payment, and that may make the household budget workable. In a proposal the home never passes to anyone; you keep it so long as the mortgage payments stay current. The Consumer Proposal Resource Centre explains what a proposal is and how it works, and the Consumer Proposal Calculator will show you what a proposal on your unsecured balance would cost each month. The mortgages guide covers keeping and renewing the mortgage through a proposal.

If the house is going to be sold for less than you owe, filing changes the shape of what is left. The shortfall becomes an ordinary unsecured claim in your insolvency, ranking alongside your other unsecured creditors instead of following you personally without limit. That is the piece filing reaches. And it reaches a sale that happens after you file, too: if the mortgage was already on your books when you filed, the shortfall from a later sale is dealt with inside your proposal, not on top of it. The lender files a claim for the balance and is paid like any other unsecured creditor. In a bankruptcy the same shortfall is released by your discharge.

Two things to know about which door. In a bankruptcy your property vests in the trustee; in a proposal it does not, and Consumer proposal versus bankruptcy, worked line by line sets out what that means for a home. And where the debt is above the consumer proposal limit, or a secured lender needs to be bound, the route is a Division 1 proposal, which Division 1 Proposals in Plain Terms explains.

Selling the house while you are in a proposal

You can, because it is still your house, and the first step is to talk to your trustee before listing it. Whether the money from the sale has somewhere to go depends on the terms of your own proposal, and a sale that will not clear the mortgages leaves a shortfall your proposal deals with, so long as the mortgage was already on your books when you filed. If you expect the sale proceeds to fall short of repaying one or more mortgages, do not proceed without a good-faith discussion with the affected lenders. I have seen cases in which that discussion did not take place and a lender withheld its mortgage discharge. The reasons a lender might do this are beyond the scope of this article. Both questions, with the arithmetic of selling against keeping, are answered in full on Selling your house when you have too much debt: before, during, or after a proposal.

What if the house has already been sold and I still owe money?

For a detailed explanation of checking the lender’s accounting and responding to the remaining debt, see The lender’s bill: how to check what a power of sale really cost you, and how to get money back.

The letter is not the last word. The number in it can be checked, it can be challenged, and if it is real, it can be dealt with.

When a house is sold under power of sale for less than the debt, the difference is the deficiency, and in Ontario the lender can pursue you for it personally. The remaining balance needs its own plan. Three things to do, in order.

First, get the accounting. You are entitled to see how the number was reached: the sale price, every deduction, the lender’s fees, the legal costs, the interest, the insurance the lender placed. Ask for the full payout statement, the ledger, the invoices, the listing agreement and the statement of adjustments. What actually happens in a power of sale in Ontario, the guide, sets out what those documents should and should not contain.

Second, if the charges do not add up, have them assessed. The Mortgages Act lets a borrower require a lender’s power-of-sale costs to be assessed by an assessment officer without going to court. Ask a lawyer to check the disputed charges and explain the available challenge.

Third, if what is left is real, it is unsecured debt, and unsecured debt is what a proposal or a bankruptcy is for. A deficiency that ends up in a filing stops being an open-ended personal pursuit and becomes a defined, ranked claim handled through the insolvency. What that does to your credit file, and how long it stays there, is on Your credit after a consumer proposal or bankruptcy: R7, R9, and the honest answers.

Can’t find your answer here?

This site is built to answer these questions properly, and most of the time it will. If yours is not here, send it to me. I read them myself, and I answer them personally.

If what you want is to understand your next steps, I can help you with that directly in Ontario. The first thing I will do is assess whether you are insolvent under the Act; if you are not, I will say so. The other Licensed Insolvency Trustees I work with can assist across the rest of Canada.

Paul Franchi, Licensed Insolvency Trustee

Common questions

How long does a power of sale take in Ontario? The law’s minimum, under a mortgage with a power of sale, is fifteen days of default before a Notice of Sale and thirty-five days after it before a sale can be made, so about seven weeks at the very fastest. A lender may take longer, and how long is the lender’s choice, not yours. Plan on the minimum.

How fast does it happen once the notice arrives? The thirty-five days is the floor. The lender cannot sell before it. After it, the lender may proceed, and the marketing and closing of a sale takes whatever time the market takes.

Does a power of sale affect your credit score? The missed payments already have. How adverse items are reported and how long they can stay on your file is on the credit page linked above. How a power of sale itself is reported is not published in one place by the bureaus, and I will not guess at it.

Can you stop a power of sale after the notice? Yes, by paying what the notice demands within the thirty-five days; the lender must accept it. Short of paying, the sale can be challenged where the lender has not followed the law, and that is a lawyer’s work, not a trustee’s.

Does a consumer proposal stop a power of sale? Usually not. The stay that protects you from unsecured creditors does not stop a secured lender enforcing its mortgage. What a proposal does is clear the unsecured debt around the mortgage, and, if the house is lost, contain the shortfall.

What happens to the shortfall? It is unsecured debt the lender can pursue you for personally. Check the lender’s accounting first; then, if it is real, it is exactly the kind of debt a proposal or bankruptcy deals with.

The analysis behind this page

The statutory periods, the stay provisions and the treatment of the deficiency on this page are drawn from this site’s guide, Power of Sale in Ontario, which carries the section numbers and the case law, and from Mortgages and a Consumer Proposal: Renewing, Refinancing, and Buying a Home. Figures are as at the dates stated beside them. This page is general information about Ontario law and is not advice about your situation; the sections above tell you who to ask.