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What is a Power of Sale?

By 360Lending

October 3, 2024

For most homeowners in Ontario, a mortgage is the biggest financial commitment they’ll ever make. But when things go wrong — missed payments, job loss, or overwhelming debt — the lender has the legal right to step in.

One of the most important tools they can use is called a Power of Sale.

Understanding Power of Sale: The Basics

If you fall behind on your mortgage in Ontario, your lender has the legal right to recover their money — and the most common way they do this is through a Power of Sale.

Power of Sale is a legal process that allows the lender to sell your home if you default on your mortgage payments. It’s widely used in Ontario because it’s faster and less expensive than foreclosure, and it doesn’t require court involvement in most cases.

Here’s how it works:

You still legally own the home throughout the Power of Sale process — the lender never takes title or full ownership.

The lender has the right to list and sell the home once you’ve defaulted and the legal notice period has passed.

The sale proceeds go toward paying off the mortgage and any additional costs like legal fees, penalties, or unpaid property taxes.

If there’s any money left after all debts and fees are paid, the remaining funds go back to you, the homeowner.

This process is very different from foreclosure, where the lender takes full ownership of the property and keeps all proceeds from the sale. In Ontario, lenders prefer Power of Sale because it’s:

Faster – no lengthy court proceedings

Cheaper – lower legal and administrative costs

Less risky – easier to resolve if the borrower can catch up or sell in time

The key takeaway? With Power of Sale, you still have rights — and if you act quickly, you may be able to stop the sale, protect your equity, and keep your home.

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When Does Power of Sale Happen?

A lender can begin the Power of Sale process after a default — typically when you’ve missed one or more mortgage payments. But it doesn’t happen right away. In Ontario, the process has several legal steps to protect homeowners and give them a chance to catch up.

Here’s a general timeline:

Step 1: You Miss a Payment

If you miss a mortgage payment, your lender may reach out to let you know. Many lenders will give you a 15-day grace period before taking further action. At this stage, you can still make the missed payment and bring the mortgage back into good standing.

Step 2: Lender Issues a Notice of Default

If the payment isn’t made, the lender can send a Notice of Default under the Ontario Mortgage Act. This is usually done through a lawyer, and it gives you a formal warning.

Step 3: 35-Day Redemption Period

Once you receive a Notice of Sale, you have a 35-day period (known as the redemption period) to bring your mortgage back into good standing. This may involve:

Catching up on missed payments

Paying legal fees and penalties

Paying off the mortgage in full (rare, but possible)

During this time, the lender can’t sell your home — you still have full rights to it.

Step 4: Home Is Listed for Sale

If the 35-day redemption period passes without resolution, the lender can list your home for sale — usually through a real estate agent. This is the actual “Power of Sale” part of the process.

At this point, the clock is ticking. Once a buyer is found, the home can be sold — and you’ll be legally required to vacate the property.

Difference Between Power of Sale vs. Foreclosure

If you’ve fallen behind on mortgage payments, you might hear terms like Power of Sale and foreclosure being tossed around. While they both involve a lender stepping in after a default, they work very differently — especially in Ontario.

Here’s what you need to know:

Power of Sale (Most Common in Ontario)

You still legally own your home during the process

The lender doesn’t take title — they simply have the right to sell your home if you default

Any money left after the mortgage, penalties, and legal costs is returned to you

It’s handled outside of court, which means it’s faster and less expensive for the lender

You can still stop the process by catching up on payments, refinancing, or selling the home yourself

Foreclosure (Rare in Ontario)

The lender takes full ownership of your home through a court process

You lose all legal rights to the property — even before it’s sold

Any profit from the sale goes to the lender, not you

It’s a longer, more complex legal route that’s typically only used in rare or unusual cases

In Short:

Power of Sale = you still own the home until it’s sold, and you might walk away with leftover equity

Foreclosure = lender takes ownership, and you likely get nothing back

In Ontario, lenders almost always use Power of Sale because it’s quicker and cheaper — but for homeowners, that also means there’s usually still a window of time to get help before the home is lost.

What Happens to the Sale Money?

If your home is sold under Power of Sale, here’s how the sale proceeds are typically distributed:

Outstanding mortgage balance is paid off

Legal fees, real estate commissions, and penalties are deducted

Any remaining money is sent to you, the homeowner

For example, let’s say your home is sold for $600,000 and you owe:

$500,000 on the mortgage

$15,000 in legal fees and penalties

After the sale, you would receive the leftover $85,000 — assuming everything goes smoothly.

But here's the catch: if the home sells for less than what you owe, you could still be on the hook for the shortfall. This is called a mortgage deficiency.

Can You Stop a Power of Sale?

Yes — but time is limited. Here are a few ways to stop the Power of Sale process:

✅ Use Your Home Equity

If you have enough equity, you may be able to refinance through another lender or take out a second mortgage to cover the arrears. Even if your credit is bruised, a mortgage broker can help you find options through private lenders.

✅ Catch Up on Missed Payments

During the 35-day redemption period, you can stop the Power of Sale simply by paying what you owe — including any penalties or fees.

✅ Sell the Home Yourself

If you act quickly, you may be able to sell your home privately before the lender does. This can give you more control over the sale price — and potentially leave you with more money in your pocket.

Common Reasons Homeowners Face Power of Sale

Power of Sale can happen to anyone — even responsible homeowners. Some of the most common causes include:

Job loss or reduced income

Unexpected medical expenses

Separation or divorce

High-interest debt piling up

Missed payments due to illness or disability

In many cases, it’s not just about missed payments — it’s about not knowing what options are available to stop things before they escalate.

Can You Stop a Power of Sale Once It Starts?

Yes, and many homeowners do — but the key is to act quickly.

The sooner you take action, the more options you have. Once your lender sends a Notice of Sale, you have a 35-day redemption period to fix the situation. That’s your window to:

Catch up on your missed mortgage payments

Pay any legal or administrative fees

Reinstate your mortgage or refinance it

Even after the 35 days, you may still be able to stop the home from being sold — but it becomes much harder, especially once the property is listed publicly.

Your Options to Avoid Losing Your Home

If you’re behind on mortgage payments and worried about Power of Sale, don’t give up. There are still ways to take control — but the sooner you act, the better your chances.

Here are some of the most common solutions:

1. Get a Second Mortgage from a Private Lender

If you’ve missed payments on your first mortgage, most banks and traditional lenders won’t refinance you — especially if the Power of Sale process has already started. They view it as too risky.

That’s where a second mortgage can help.

A second mortgage is a loan that uses your home’s equity as collateral, sitting behind your first mortgage. If you have enough equity, a private lender may be willing to offer a second mortgage to:

Pay off the missed payments

Cover the legal and administrative fees

Stop the Power of Sale and give you breathing room

Second mortgages from private lenders usually have higher interest rates, but they’re often the only option available when time is limited and credit has taken a hit. Think of it as a short-term bridge — one that helps you stop the bleeding now so you can make a longer-term plan.

2. Catch Up on Missed Payments

If your financial issue was short-term — like a gap in employment or a sudden expense — you may still be able to catch up and bring your mortgage current. This typically means paying off the arrears in full, including any interest, legal fees, or penalties the lender has added.

Sometimes this can be done with savings, help from family, or other personal funds. If not, a mortgage broker can help you explore short-term lending options.

3. Sell the Home Yourself Before the Lender Does

If keeping the home long-term isn’t realistic, selling it yourself may still protect your equity. Once the lender starts Power of Sale, they control the sale process — and they’ll prioritize speed over price. That could leave you with less money, or even a shortfall if the home sells below market value.

Selling privately (before the lender takes over) gives you:

More control over the asking price

A chance to negotiate your closing date

The ability to pay off your mortgage and fees on your own terms

If this is the route you choose, your broker can help you coordinate everything: working with a real estate agent, managing the timeline, and ensuring the proceeds are used properly to stop the Power of Sale in time.

How Mortgage Brokers Can Help

Facing a Power of Sale is stressful — emotionally and financially. But you don’t have to handle it on your own. A mortgage broker who specializes in helping homeowners in distress can make all the difference.

Here’s how brokers like 360Lending can help:

✅ Evaluate Your Situation Quickly

Time is critical. Your broker will assess your mortgage, equity, credit, income, and legal status to determine what options are available — often within 24 hours.

✅ Negotiate with Your Lender

Sometimes, lenders are open to halting the legal process if they know you’re actively working with a broker to resolve things. Your broker can communicate directly with the lender or their legal representative on your behalf to buy you more time.

✅ Access Lenders That Others Can’t

Most banks won’t help you once you’re in default. But brokers have access to a network of alternative lenders and private mortgage lenders who specialize in these types of high-stakes situations — and often move quickly.

✅ Arrange a Second Mortgage

Brokers can secure financing even when your bank says no. With a short-term second mortgage, they’ll help you structure a plan that gives you breathing room and time to recover.

✅ Create a Long-Term Plan

Stopping a Power of Sale is only half the battle. Your broker will also work with you to reduce your monthly obligations, consolidate high-interest debt, and improve your credit — so you’re not in the same position again a year from now.

Don’t Wait Until It’s Too Late

Power of Sale can feel like the end of the road — but for many Ontario homeowners, it’s really just a turning point. With the right help, it’s possible to stop the process, keep your home, and rebuild your financial footing.

At 360Lending, we specialize in helping homeowners who are facing financial pressure or mortgage default. We work quickly, we understand the urgency, and we’ll treat you with compassion — not judgment.

Whether you’re in the early stages of falling behind or already facing a legal notice, it’s never too early to reach out. We’ll help you understand your options and fight to keep you in your home.

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