Foreclosure in Ontario: What You Need to Know
By Tony Slavin 905-767-0101
When it comes to owning a home, unforeseen difficulties can sometimes lead to the risk of foreclosure. In Ontario, foreclosure is a legal process that occurs when a homeowner fails to meet their mortgage obligations, and the lender seeks to recover the balance of the loan.
Understanding this process is crucial for anyone facing or at risk of mortgage default. This guide will walk you through the basics of foreclosure, helping you comprehend what happens, what your options might be, and the potential aftermath of such situations.

by Tony Slavin

Understanding Foreclosure Process
Other Provinces
The foreclosure process varies from one province to the next. Foreclosures are common method used by lenders to recoup the mortgage amount in provinces such as British Columbia, Alberta, Manitoba, Saskatchewan, Quebec and Nova Scotia.
Ontario and Others
If you reside in Ontario, Newfoundland, New Brunswick, Prince Edwards Island then Power of Sale is quite a popular process that lenders choose to recover the mortgage payment. However, in many cases lenders opt for a foreclosure to avoid any high risk or losing loan amount.
When does Foreclosure happen to Homes?
1
Missed Payments
The foreclosure process begins when a homeowner defaults on their mortgage payments. Depending on the mortgage agreement, defaults can occur after missing several payments.
2
Lender Action
Typically, lenders allow three missed mortgage payments before considering foreclosure; however, the process completely depends on terms set by lenders. They hold legal rights to take ownership of the property and sell it to regain the loan amount.
3
Consequences
Consequences of foreclosure include losing your home and damaging your credit score significantly, which can affect your ability to borrow money or buy a house in future. It's a scenario that home buyers hope to avoid but it's important to understand how it works just in case you fall into that situation.
Laws and Regulations in Ontario
Ontario Mortgages Act
Foreclosure laws in Ontario are somewhat different from those in other provinces in Canada and are designed to provide a fair process. The process is governed under the Ontario Mortgages Act.
Judicial Sale Process
Foreclosures in Ontario typically go through the judicial sale process, where the lender must apply to the court to get permission to sell the property. This ensures that the process is monitored and fair, preventing unlawful evictions and sales.
Bank Practices
Canadian banks are often open to working with homeowners to find solutions before moving toward foreclosure, as mandated by regulatory practices.
Foreclosure Process in Ontario: Step by Step
1
Notice of Default
The first step in the foreclosure process in Ontario usually starts with a Notice of Default. When a homeowner fails to make a mortgage payment, the lender issues this notice to inform the borrower that they are in breach of the mortgage agreement.
2
Period of Redemption
After receiving the Notice of Default, homeowners are typically given a redemption period. This period, often lasting 35 days, allows the borrower a chance to pay off the overdue amounts, including any additional fees, to bring the mortgage back into good standing.
3
Issuing a Statement of Claim
If the homeowner fails to settle the arrears within the redemption period, the lender then moves forward by issuing a Statement of Claim for Foreclosure. This is a legal document filed in court outlining the lender's claim against the borrower.
4
Court Involvement
If the borrower does not respond, the case proceeds to court where the lender may ask for a judgment for foreclosure. The court will look at the details of the case and grant the lender the right to sell the property if certain conditions are met.
Final Stages of Foreclosure
Order for Foreclosure
Once the court is satisfied, it may issue an Order for Foreclosure. It means that ownership of the property transfers to the lender, effectively ending the borrower's rights to the property. An Order for Sale allows the lender to sell the property, aiming to recover the mortgage balance and any associated costs.
Selling the Property
With an Order for Sale, the lender lists the property for sale, usually via a real estate agent. The listing price is typically close to the market value of the property to attract potential buyers quickly.
Sale and Proceeds Distribution
Once the property is sold, the lender uses the process to cover the remaining mortgage balance and any additional costs. If the sale generates excess funds, they may be returned to the borrower called Surplus funds. However, if the sale proceeds are insufficient then lender don't have ability to pursue deficiency judgment against the homeowner for the shortfall.
Quarterly Average Days to Foreclosure
180
Q1 2023
190
Q2 2023
200
Q3 2023
210
Q4 2023
This visualization helps in understanding the trends and any potential patterns in the foreclosure process over time. The data shows a gradual increase in the average days to foreclosure throughout 2023.
Foreclosure vs Power of Sale
Foreclosure
In traditional foreclosure, the lender takes full ownership of the property and then sells it to recover the loan balance. This is a more judicial process, often including court orders.
Power of Sale
In Ontario, lenders usually choose power of sale, wherein they sell the property without the need for court intervention, under legal authorities sanctioned without taking ownership first. This process is quicker, less costly, and generally avoids lengthy court proceedings.
Rights and Options for Homeowners
Right to Redemption
Homeowners have a period during the foreclosure process where they can pay off the remaining mortgage balance and any other costs incurred by the lender to stop the foreclosure.
Reinstatement Rights
Before the foreclosure is finalized, homeowners might have the option to reinstate the mortgage by making all overdue payments to bring the mortgage current, along with any applicable fees.
Legal Representation
Homeowners have the right to seek legal counsel, which can provide guidance and may help negotiate terms with the lender, potentially arranging for a more favorable outcome like a loan modification.
Selling the Property
If a homeowner realizes that keeping the home is untenable, they have the option to sell the property before the final stages of foreclosure, giving them a chance to pay off their mortgage debt and avoid having a foreclosure on their credit report.
Strategic Ways to Save Your Property
1
Get a Private Loan
One avenue to consider in avoiding foreclosure is obtaining a private loan. Private lenders are often more flexible than banks and might provide you with the necessary funds to pay off your outstanding mortgage balances.
2
Refinance Your Mortgage
Refinancing your mortgage allows you to adjust your loan terms, possibly lowering your monthly payments or consolidating your debt into a single loan.
3
Negotiate with the Lender
Communicating openly with your lender about your financial difficulties can sometimes lead to modified loan arrangements that prevent foreclosure.
4
Have a Private Lender Buy Out the Mortgage
Another possible strategy is to find a private lender willing to buy out your existing mortgage. This can clear your debt with the original lender and stop the foreclosure process.
5
Request Forbearance
Forbearance is an agreement to temporarily suspend or reduce your mortgage payments for a specific period.