Power of sale in Ontario: reinstate or pay out?
Most Ontario lenders enforce a defaulted mortgage by power of sale under Part III of the Mortgages Act, rather than by foreclosure. The Act sets minimum waiting periods before a lender can sell:
- 15 days of default before a notice of sale can be given (s. 32).
- 35 days after the notice before the property can be sold (s. 31).
Your mortgage terms can set longer periods, and many lenders take months to list and sell. The statutory minimum is still the date to plan around.
Reinstating the mortgage
Section 22 of the Act lets a borrower put the mortgage back in good standing by paying the arrears and the lender's permitted costs, even if the lender has demanded the full balance. While the notice period runs, section 42 generally stops the lender from taking further enforcement steps. Reinstating is usually far cheaper than a full payout, because it avoids the prepayment charge and the need to refinance.
What the lender can add
Interest on missed payments is charged at the contract rate. The federal Interest Act (s. 8) bars penalty rates on arrears that exceed the rate on money not in arrears. Fees such as NSF charges, property taxes the lender paid, and legal costs must be allowed by the mortgage. The legal costs of a notice of sale are capped by regulation.
Frequently asked questions
How long does a lender have to wait before selling in Ontario?
The Mortgages Act requires at least 15 days of default before a notice of sale, then at least 35 days after the notice before a sale. Your mortgage may set longer periods.
Can I stop a power of sale by paying the arrears?
Generally yes. Section 22 of the Mortgages Act lets a borrower put the mortgage back in good standing by paying the arrears and permitted costs. Get a written reinstatement statement from the lender.
Can the lender charge a higher interest rate on missed payments?
No. Section 8 of the federal Interest Act bars a higher rate or penalty on arrears than the rate charged on money not in arrears.