Behind on your mortgage in Ontario: what to do next

A guide in the Mortgage Trouble centre

Find the stage you have reached, understand the questions to ask, and put the mortgage beside the rest of your household debts.

A missed mortgage payment does not mean your home is already lost. But waiting can increase the amount you owe and reduce your choices. Start by finding out what stage the lender has reached, what it requires and what your household can realistically afford.

If you have received a Notice of Sale, contact a real estate or mortgage lawyer promptly. Do not wait for a refinancing application or an insolvency appointment to deal with the notice.

A licensed mortgage professional (such as a mortgage broker or agent), a lawyer and a Licensed Insolvency Trustee answer different questions. You may need more than one of them at the same time.

Start with the stage you are in

Your situation and the next useful step

What has happened	What to do
A payment is late; no formal enforcement yet	Ask the lender for the arrears and the amount needed to correct the default in writing. Discuss a documented payment arrangement.
Renewal is refused or the new payment is unaffordable	Ask your mortgage broker to assess available financing and its full cost. Confirm the maturity date with your lender.
A Notice of Sale has arrived	Have a lawyer check the notice, service, deadline and amount required to stop the sale.
Other debts are taking the money needed for the mortgage	Have the full household budget and debt position assessed. An LIT may help if the household is insolvent.
Keeping the home is no longer affordable	Compare a voluntary sale with the costs and timing of enforcement, with help from a licensed real estate professional and a lawyer.
The lender has sold and claims a shortfall	Get the accounting checked. If the remaining debt cannot be paid, seek an insolvency assessment.

What happens after a missed mortgage payment?

A missed payment is a default. So is failing to pay the balance at the end of the mortgage term when there is no renewal. Other breaches of the mortgage can also put you in default.

A lender may then begin the steps toward a power of sale. This is the process by which it can sell the property to recover the mortgage debt. The detailed legal explanation is in Power of Sale in Ontario.

Ask the lender what it intends to do. Do not assume that an extension is available or that a conversation has paused enforcement.

What does a Notice of Sale mean?

A Notice of Sale is a formal warning before the lender exercises its power of sale. It is not itself a transfer of title, a judgment or a seizure of the home.

For a mortgage containing a power of sale, the minimum periods described in this site’s detailed guide are:

• At least 15 days of default before the lender can give a Notice of Sale.
• At least 35 days after the notice is given before the lender can sell.

These are minimum periods, not a promise of additional time. Have a lawyer check the dates and service of your actual notice immediately.

During the notice period, paying the amount required on the notice’s terms can stop the sale. Your lawyer should confirm what must be paid and how. After that period, your ability to redeem may depend on whether the lender has already entered into a sale agreement. Do not assume the option remains open.

A lawyer can also assess a problem with service or the lender’s procedure. A possible challenge does not make the mortgage debt disappear, and it is not a reason to ignore the notice.

How much do you need to pay?

Ask for an itemized figure in writing. The amount needed to correct a default or stop a sale may be more than the missed payments. Interest, legal costs, enforcement expenses and disputed fees may have been added.

You may hear the term redemption figure. Ask your lawyer exactly what the quoted payment would accomplish: would it correct the default and allow the mortgage to continue, or pay out the mortgage entirely? Ask how long the figure is valid and what interest or charges continue to be added. Have your lawyer check it against the mortgage and the lender’s records, especially any default-rate interest and private-lender charges.

If you arrange payment, obtain written confirmation of what it resolves and whether the default has been corrected. Do not assume that paying the missed instalments alone settles every amount demanded.

Can the lender give you more time?

Ask with a specific plan: explain the shortfall, provide a budget and identify when you expect to catch up. A bank or credit union may have a hardship process. Ask what arrangements it will consider.

Get any agreement in writing, including the payments, dates, costs and effect on enforcement. Do not build your plan around a private lender agreeing to an extension. Interest and charges may continue while you discuss one.

The distinction is whether the problem is temporary or recurring. An arrangement may help bridge a temporary gap. It will not solve a budget that remains short every month.

Should you refinance or replace the mortgage?

A broker can assess the options based on your income, debts, credit and property. A refusal by one bank is not the end of the lending market. Another institutional lender or a private lender may offer financing, but approval alone does not establish that the loan is affordable.

For each offer, compare:

• The cash available after existing mortgage payouts, arrears and fees, without subtracting costs already included in a payout figure twice.
• The interest, lender and broker fees, legal expenses and other charges.
• The payment alongside all remaining household expenses and debts.
• The balance due at the end of the term and the realistic plan to repay it.

An expensive short-term loan can have a useful purpose, such as allowing time for an orderly sale. Repeated borrowing with no workable repayment plan may simply turn today’s arrears into a larger problem.

If renewal is the immediate issue, see Mortgage renewal denied or unaffordable. If the home remains too expensive even after other debts are addressed, compare the housing options before borrowing again.

Should you sell before the lender does?

If the home must be sold, compare a voluntary sale while you still have choices about your realtor, price and timing. A lawyer should confirm how enforcement affects those choices and what is needed to discharge each mortgage.

Estimate the likely sale price, then deduct every mortgage payout, arrears, selling costs and lender charges without counting the same cost twice. A positive balance may leave equity to protect. A negative balance means the sale may leave debt behind.

If the proceeds will not pay a lender in full, discuss the shortfall and release of its mortgage before relying on a sale. Do not assume the lender will discharge its security simply because you found a buyer.

Read Selling your house when you have too much debt before deciding how a sale and a debt arrangement should fit together.

Can a consumer proposal stop a power of sale?

Usually not. Do not assume that filing a consumer proposal or bankruptcy will stop a secured mortgage lender from enforcing. The protections that apply to unsecured creditors do not generally stop the mortgage lender. Any possible court relief requires specific legal advice; it is not a pause to count on.

A consumer proposal may still help an eligible borrower whose unsecured debts are making an otherwise affordable mortgage difficult to carry. The budget must include the proposed payment, mortgage and all other expenses. Keeping the home also requires an assessment of equity and the mortgage obligations.

If the home sells for less than the mortgage debt, an insolvency proceeding may address the unsecured shortfall. The timing and treatment need to be assessed against the actual mortgage, sale and filing. A shortfall arising after a filing may also be dealt with where the mortgage obligation already existed when the person filed.

These remedies require an insolvency assessment. They are not available simply because a mortgage application was refused. Consumer proposals and bankruptcy also treat property differently. See Mortgages and a Consumer Proposal for the detail.

If you are already in a proposal, speak with your trustee before listing the home. The proposal’s terms may affect the sale proceeds. A larger debt load or circumstances involving secured creditors may require assessment of a Division 1 proposal.

The house has sold and the lender says you still owe money

The claimed shortfall needs to be checked, not simply accepted. Ask for the sale price, payout statement, ledger, invoices and statement of adjustments, with a breakdown of interest, legal fees and other deductions.

Have a lawyer review disputed charges and explain the available challenge. The Power of Sale guide explains the accounting and costs in more detail.

If a valid balance remains, the lender may pursue you for it personally. If you are already in a proposal or bankruptcy, ask your trustee how the claimed shortfall is treated before assuming it is a new debt outside that proceeding. If you cannot pay your debts and are not already in a proceeding, a Licensed Insolvency Trustee can assess the available options. Do not confuse a sale of the home with release from every remaining debt.

Get the right help for your stage

For a Notice of Sale or enforcement deadline, contact a lawyer promptly. For a realistic financing comparison, speak with your mortgage broker. For debts your household cannot carry, contact Paul Franchi, Licensed Insolvency Trustee, about an assessment in Ontario, or leave a voicemail at 647-492-9283.

Return to the Mortgage Trouble centre for related guides. This is general information, not advice about your notice, mortgage or financial circumstances.