You've received a Notice of Sale under Mortgage. Your lender has initiated power of sale proceedings, and your home will be sold at auction unless you take immediate action. You're behind on mortgage payments—perhaps 3, 6, or 9 months in arrears—and the lender has exhausted their patience with payment arrangements. The letter states your property will be listed for sale in 35 days unless you pay the full arrears plus legal costs.
This is one of the most stressful situations a homeowner can face. But power of sale is not inevitable. In Ontario, you have legal rights and refinancing options that can stop the process, bring your mortgage current, and allow you to keep your home—provided you act quickly and understand your options.
This guide explains Ontario's power of sale process, your legal rights as a homeowner, refinancing options available even with mortgage arrears, timeline considerations, costs to expect, and the specific steps to halt power of sale proceedings through private mortgage refinancing. If you're facing this situation, time is critical—but solutions exist.
⚠️ Critical Timeline: Act Within 35 Days
Once you receive a Notice of Sale under Mortgage in Ontario, you have 35 days before your lender can list your property for sale. After listing, the power of sale process accelerates significantly.
If you want to stop power of sale through refinancing, you must start the process immediately. Private mortgage approval takes 1-3 weeks, but coordinating with your existing lender, obtaining appraisals, and completing legal work adds time. Waiting until day 30 to take action significantly reduces your options.
Understanding Power of Sale in Ontario
Power of sale is Ontario's legal process allowing mortgage lenders to sell a property when the borrower defaults on mortgage payments. Unlike judicial foreclosure (used in some other provinces), power of sale does not require court approval in Ontario—the lender can proceed based on contractual rights in your mortgage agreement.
How Power of Sale Differs from Foreclosure
While "power of sale" and "foreclosure" are often used interchangeably, they're different legal processes:
Power of Sale (Ontario)
- Lender sells property to recover debt
- No court process required
- Homeowner retains surplus proceeds (if any)
- Faster process (4-6 months typically)
- Can be stopped by paying arrears + costs
Judicial Foreclosure (Other Provinces)
- Court transfers ownership to lender
- Requires court proceedings
- Lender keeps property (no surplus to homeowner)
- Slower process (can take 1-2 years)
- More complex to stop once initiated
In Ontario, power of sale is the standard process. This actually works in your favor if you're pursuing refinancing to stop the sale—the lender wants to be repaid, not own your property. A private mortgage that pays off the arrears and brings the mortgage current is a win for both parties.
The Ontario Power of Sale Timeline
Understanding the timeline helps you identify which stage you're at and how much time you have to act:
Day 1-90: Missed Payments (Pre-Action Period)
What Happens: You miss 1-3 mortgage payments. Lender sends payment reminder letters and may call to discuss payment arrangements.
Your Options: Catch up on arrears, negotiate payment plan, or begin exploring refinancing options. This is the easiest time to resolve the situation.
Day 90-105: Notice of Sale Under Mortgage (15-Day Demand Notice)
What Happens: After 15 days in default, lender sends Notice of Sale under Mortgage stating you have 35 days to pay arrears + costs before property is listed for sale.
Your Options: Pay arrears in full, negotiate forbearance agreement, or secure refinancing to pay off arrears. This is your critical action window.
Day 140+: Property Listed for Sale
What Happens: If you haven't paid arrears within 35 days, lender lists property for sale. Listing must remain active for minimum 30 days before accepting offers.
Your Options: You can still stop the sale by paying full mortgage balance + legal costs, or through refinancing. Lender prefers repayment over sale completion (costly for them too).
Day 170+: Offer Accepted, Sale Closing Pending
What Happens: Buyer makes offer, lender accepts. Sale closing date set (typically 30-60 days from acceptance).
Your Options: Extremely limited. You must pay full mortgage balance + all legal costs immediately, or refinancing must close before sale closes. Time is almost gone.
Day 200+: Sale Closes, Ownership Transfers
What Happens: Property ownership transfers to buyer. You lose the home. Lender takes proceeds to recover debt. Any surplus (rare in power of sale) goes to you after all costs deducted.
Your Options: None. Home is sold. If sale proceeds don't cover full debt + costs, you still owe the deficiency.
Your Legal Rights During Power of Sale in Ontario
Ontario law provides homeowners with specific rights during power of sale proceedings:
- Right to Notice: Lender must provide proper Notice of Sale under Mortgage and wait 35 days before listing property. Notice must include arrears amount, legal costs, and redemption deadline.
- Right to Redemption: You can stop the power of sale at any time before closing by paying the full mortgage balance plus all costs (arrears, interest, legal fees).
- Right to Fair Market Sale: Lender must make reasonable efforts to obtain fair market value. If they sell below market deliberately, you can challenge the sale.
- Right to Surplus Proceeds: If property sells for more than mortgage balance + costs, you're entitled to surplus. Lender cannot keep excess.
- Right to Remain Until Closing: You can occupy the property until the sale closes and ownership transfers (though lender may pursue immediate eviction order if you cause property damage).
- Right to Refinance: You have the legal right to refinance with another lender to pay off the existing mortgage and stop power of sale—this right exists until sale closes.
Important Legal Note:
This guide provides general information about Ontario power of sale processes. If you're facing power of sale, consult with a real estate lawyer to understand your specific rights and ensure proper legal procedures are followed. Legal costs for stopping power of sale typically range from $1,500-$3,000 and are recoverable when refinancing.
Refinancing Options to Stop Power of Sale
When you're in power of sale proceedings, traditional banks will not refinance your mortgage—you're in default, which automatically disqualifies you from conventional lending. Your refinancing options are through private lenders who specialize in emergency situations and equity-based lending.
Option 1: Private Mortgage Refinance (Most Common Solution)
A private mortgage refinances your existing mortgage, pays off all arrears and legal costs, and provides a new mortgage free of default status.
How It Works:
- Apply for private mortgage covering current mortgage balance + arrears + costs
- Private lender approves based on property equity (not credit or arrears status)
- New mortgage pays off existing lender in full, eliminating power of sale
- You make payments on new private mortgage (typically 6-24 month term)
- Exit strategy: Refinance to traditional bank after rebuilding payment history
Qualification Requirements:
- Sufficient Equity: Typically need 20-25% equity after new mortgage (max 75-80% LTV)
- Ability to Service Payments: Must demonstrate income to cover interest payments
- Clear Exit Strategy: Plan to refinance to bank, sell property, or other repayment within term
- Property in Reasonable Condition: Marketable if worst-case default occurs
Typical Costs: Interest rates 7.99-14.99%, lender fee 1-3%, appraisal $300-$500, legal fees $1,500-$2,500. See complete cost breakdown.
Option 2: Second Mortgage to Clear Arrears (If Some Equity Available)
If you have substantial equity and your first mortgage lender agrees to accept arrears payment (stopping power of sale), you can take a private second mortgage just to cover arrears + costs rather than refinancing the entire mortgage.
How It Works:
- Negotiate with existing lender to stop power of sale if arrears paid
- Apply for second mortgage from private lender for arrears amount
- Use second mortgage proceeds to pay arrears + lender's legal costs
- First mortgage remains in place (you keep existing rate/term)
- Make payments on both first mortgage and second mortgage
When This Works:
- Your first mortgage has favorable rate/terms you want to keep
- Arrears amount is relatively small ($15K-$40K)
- You have 30%+ equity in property (combined first + second mortgage under 70% LTV)
- First mortgage lender agrees in writing to halt power of sale upon arrears payment
Option 3: Family/Private Investor Loan (Alternative Funding)
If you have access to private capital (family, friends, private investors), you can borrow funds to pay arrears directly, then repay your private lender over time. This avoids institutional lender fees but requires willing private investors.
Considerations: Proper legal documentation is essential (promissory note, security registration). Mixing family and money creates relationship risks. Ensure clear repayment terms and exit strategy.
Real-World Power of Sale Refinancing Example
Case Study: Toronto Homeowner Stops Power of Sale with Private Refinancing
Situation:
- Property value: $700,000
- Existing mortgage: $420,000
- Arrears: $18,000 (6 missed payments)
- Lender legal costs: $3,500
- Notice of Sale received, 28 days remaining before listing
- Homeowner recently self-employed, cannot qualify for bank refinancing
Solution: Private Mortgage Refinance
- New private mortgage: $450,000 (64% LTV)
- Pays off existing mortgage: $420,000
- Pays arrears + lender costs: $21,500
- Cash to homeowner after fees: $8,500 (provides cushion for future payments)
Costs:
- Interest rate: 9.99% (good equity position = better rate)
- Lender fee (2%): $9,000
- Appraisal: $450
- Legal fees: $1,800
- Total upfront costs: $11,250
Outcome:
- Power of sale stopped 11 days before listing deadline
- New mortgage term: 12 months
- Monthly payment: $3,747 interest-only
- Exit strategy: Rebuild 12 months payment history, refinance to A-lender at renewal
- Homeowner saves $280,000 in equity (would have lost in distress sale)
Key Insight: Despite paying $11,250 in fees and higher interest for 12 months (approximately $18,000 additional cost), the homeowner saves $280,000 in equity and keeps their home. The alternative—losing the home in power of sale—would have resulted in complete equity loss plus moving costs, credit damage, and housing instability.
Steps to Stop Power of Sale Through Refinancing
If you've received a Notice of Sale and want to pursue refinancing, follow these steps immediately:
Step 1: Calculate Total Payoff Amount (Day 1-2)
Contact your existing lender and request a mortgage statement showing full payout amount, including:
- Current mortgage balance
- Arrears amount (missed payments + interest)
- Lender legal costs incurred
- Prepayment penalties (if applicable)
- Payout valid through specific date
Step 2: Apply for Private Mortgage (Day 1-3)
Contact private mortgage lenders or brokers who specialize in emergency refinancing. Provide:
- Notice of Sale document
- Mortgage payout statement
- Property tax assessment or recent appraisal (if available)
- Income documentation (bank statements, business financials, employment letter)
- Explanation of how you'll make payments going forward
Step 3: Property Appraisal (Day 3-7)
Private lender orders appraisal to confirm property value and equity position. Ensure property is accessible for appraiser:
- Clean and present property well (appraisal affects value)
- Complete minor repairs if possible (address obvious deficiencies)
- Be available for appraiser access within 48 hours
- Provide recent comparable sales if you're aware of them
Step 4: Private Lender Approval (Day 7-12)
Lender reviews appraisal and application, issues conditional approval:
- Review terms carefully (rate, fees, term length, prepayment options)
- Ensure loan amount covers full payout + costs + lender fees
- Confirm no hidden fees or conditions that prevent closing
- Ask about timeline to fund—urgency matters
Step 5: Legal Documentation (Day 12-18)
Engage real estate lawyer to handle refinancing and discharge of existing mortgage:
- Inform lawyer of power of sale urgency (prioritize this file)
- Lawyer reviews new mortgage documents and closing statement
- Lawyer coordinates with existing lender's lawyer for discharge
- Ensure timing allows funding before Notice of Sale deadline
Step 6: Funding and Payout (Day 18-21)
Private lender funds new mortgage, existing mortgage is paid off:
- Funds advanced to your lawyer's trust account
- Lawyer pays off existing lender (mortgage + arrears + costs)
- Existing lender confirms receipt, withdraws Notice of Sale
- New mortgage registered on title, old mortgage discharged
- Power of sale officially stopped
Step 7: Plan Your Exit Strategy (Immediately After Funding)
Private mortgages are short-term (6-24 months). Begin working toward traditional refinancing immediately: make every payment on time, rebuild income documentation if self-employed, improve credit score if challenged, and monitor property value. Learn exit strategy planning.
Costs to Stop Power of Sale Through Refinancing
Understanding the full cost helps you evaluate whether refinancing is financially viable:
Full Cost Breakdown Example ($400,000 Refinance)
Amounts to Pay Off:
- Existing mortgage balance: $360,000
- Arrears (6 months): $12,000
- Existing lender legal costs: $3,000
- Subtotal to pay off: $375,000
New Private Mortgage Costs:
- Lender fee (2% of $400K): $8,000
- Appraisal: $450
- Legal fees (refinance + discharge): $2,200
- Subtotal new costs: $10,650
Total Loan Required:
- Existing mortgage + arrears + costs: $375,000
- New mortgage costs: $10,650
- Total: $385,650
- Actual loan: $400,000 (provides $14,350 cash to homeowner for cushion)
Ongoing Costs (12-Month Term):
- Interest rate: 10.5%
- Monthly interest payment: $3,500
- Total interest over 12 months: $42,000
Total Cost to Stop Power of Sale:
- Upfront costs: $10,650
- Interest over 12 months: $42,000
- Total 12-month cost: $52,650
Cost vs. Equity Saved: If property value is $600,000 and you owe $400,000, you have $200,000 equity. Spending $52,650 over 12 months to save $200,000 in equity is a worthwhile investment—especially considering the alternative is losing your home entirely.
What If You Don't Have Enough Equity?
If your property value doesn't support a private mortgage that covers your total debt + costs + fees, refinancing may not be possible. In this scenario, you have limited options:
- Negotiate Payment Plan with Lender: Some lenders will halt power of sale if you agree to catch up on arrears through a structured payment plan (e.g., $2,000/month extra for 12 months). This requires stable income and lender agreement.
- Sell Property Yourself (Faster Timeline): List property for sale immediately before lender lists it. You control the sale process, can maximize price, and avoid lender's legal costs adding to your debt. Proceeds pay off mortgage; you keep any equity.
- Consumer Proposal or Bankruptcy: If you're insolvent (debts exceed assets), consult with a Licensed Insolvency Trustee. Consumer proposal may allow you to keep your home while restructuring other debts. Bankruptcy results in home loss but provides fresh financial start.
- Allow Power of Sale to Proceed: If you have no equity and cannot afford payments, allowing the sale may be the least damaging option. Lender handles sale; you avoid ongoing payment stress. However, if sale proceeds don't cover debt, you're liable for deficiency.
Warning About Deficiency Balances:
If your property sells in power of sale for less than your total debt (mortgage + arrears + legal costs), you remain responsible for the deficiency. Example: You owe $350,000 total, property sells for $320,000, you owe $30,000 deficiency. The lender can pursue collection, garnish wages, or sue for judgment. This is why selling yourself or refinancing is preferable—you control the outcome.
Frequently Asked Questions
Can I stop power of sale after my property is listed for sale?
Yes. Power of sale can be stopped at any point before the sale closes by paying the full mortgage balance plus all costs. This is called exercising your "right of redemption." However, once a buyer's offer is accepted, you have very limited time (typically 30-60 days until closing) to arrange refinancing. It's far better to act during the 35-day Notice period before listing occurs.
Will power of sale ruin my credit score?
Power of sale proceedings severely damage credit (similar to foreclosure impact, dropping scores 150-250 points). Missed payments, default status, and eventual sale notation remain on your credit report for 6-7 years. Stopping power of sale through refinancing prevents the final "property sold" notation, but missed payments still appear. Rebuilding credit takes 2-3 years of consistent on-time payments after resolving the default.
Can I get a private mortgage if I'm unemployed?
Private lenders require evidence of ability to service interest payments during the mortgage term. If you're unemployed, you need to demonstrate: (1) sufficient assets/savings to cover payments for the term, (2) income from other sources (spouse income, rental income, investment income, disability/pension), or (3) confirmed employment starting soon. Equity alone isn't sufficient if you cannot demonstrate payment ability.
What happens to my tenants if I'm facing power of sale on a rental property?
In Ontario, tenants have rights during power of sale. The sale does not automatically terminate their lease—the buyer acquires the property subject to existing tenancies. However, buyers can apply to the Landlord and Tenant Board to terminate tenancies for owner occupancy (with proper notice and compensation). Inform your tenants of the situation and ensure they know their rights. Collecting rent during power of sale allows you to potentially negotiate with your lender or fund refinancing.
Should I stop making payments if I'm already in power of sale?
No. Continue making current monthly payments if possible, even if you cannot pay arrears. This demonstrates good faith to your lender and to any potential refinancing lender. Current payments reduce the total amount you need to raise through refinancing. Some lenders will negotiate if you're making current payments while working on a refinancing solution.
Key Takeaways
- ▸ Power of sale is stoppable: You have legal rights to stop the process by paying arrears or refinancing, even after property is listed—but timing is critical.
- ▸ 35-day window is your action period: Once Notice of Sale arrives, you have 35 days before listing. Start refinancing process immediately—waiting until day 30 significantly reduces options.
- ▸ Private refinancing focuses on equity: Private lenders approve based on property value and equity, not credit score or arrears status. If you have 20-25% equity, refinancing is likely possible.
- ▸ Cost of refinancing vs. losing your home: Yes, private mortgage fees and interest are higher, but preserving $150K-$300K in equity and keeping your home justifies the cost.
- ▸ Plan your exit strategy immediately: Private mortgages are short-term. After stopping power of sale, work toward traditional refinancing: rebuild payment history, improve credit, document income properly.
Facing Power of Sale? We Specialize in Emergency Refinancing
Time is critical. Our private mortgage specialists have stopped hundreds of power of sale proceedings through fast-approval refinancing. We assess your equity position, calculate total costs, and provide clear answers within 24-48 hours.
Don't wait until day 30. Call today to explore your options.
