A power of sale is the process an Ontario mortgage lender uses to sell a property when the borrower has stopped making payments. The lender does not take ownership of the home. It sells the home, uses the proceeds to pay off the mortgage and the costs of the sale, and returns anything left over to the homeowner. Power of sale is the most common way mortgage defaults are enforced in Ontario, and it runs on notice periods set out in the provincial Mortgages Act.
If you have just received a letter that uses the phrase, this guide explains what it means, how the process unfolds, how it differs from foreclosure and what a homeowner can still do at each stage. It describes the process in general terms. It is not legal advice, and your own lawyer is the right person to review your specific documents.
Power of Sale Meaning in Plain Language
Almost every Ontario mortgage contains a clause that gives the lender the right to sell the property if the borrower defaults. That clause is the “power of sale.” When a lender exercises it, the lender:
- Gives the homeowner formal written notice and a period of time to catch up.
- If the default is not fixed, takes steps to gain possession of the property.
- Lists and sells the property, usually through a real estate agent on the open market.
- Pays itself the mortgage balance, arrears, interest and enforcement costs from the sale price.
- Pays any other registered creditors in order of priority.
- Returns any surplus to the former homeowner.
The important point for a homeowner is that the lender is selling on your behalf, not taking the house for itself. You remain the owner until the sale closes, and you keep the right to sell the property yourself, refinance it or bring the mortgage current during the notice period.
Power of Sale vs. Foreclosure: What Is the Difference?
People often use the two terms interchangeably, but in Ontario they describe different remedies.
| Feature | Power of Sale | Foreclosure |
| Who ends up owning the home | A buyer on the open market | The lender takes title |
| What happens to equity above the debt | Surplus is returned to the homeowner | Generally lost to the lender |
| Court involvement | Usually limited; the process runs on statutory notices | A court action from the start |
| Typical speed | Faster | Slower |
| How common in Ontario | The standard remedy | Rare |
Because a power of sale is faster and leaves the lender with the same recovery, Ontario lenders almost always choose it over foreclosure. Our post on when it is too late to stop foreclosure in Ontario covers the court-based route in more detail.
How the Power of Sale Process Works in Ontario
The sequence below is the typical path. Exact dates depend on your mortgage terms and how your lender handles enforcement.
- Missed payment and default. The mortgage goes into default when a payment is missed or another term of the mortgage is broken, such as letting property taxes or insurance lapse.
- Demand letter. The lender or its lawyer usually sends a letter asking for the arrears to be paid by a set date. This step is not always required, but it is common.
- Notice of Sale Under Mortgage. Under the Mortgages Act, a lender can issue a Notice of Sale once the mortgage has been in default for at least 15 days. The notice must then give the homeowner at least 35 days before the lender can take further steps. A Toronto law firm’s summary of the steps in a power of sale explains these two periods and notes that a couple of extra days are usually added for delivery of the notice.
- Redemption period. During those 35 days the homeowner can “redeem” by paying the arrears plus the lender’s costs, or by paying off the whole mortgage through a refinance or a sale.
- Statement of claim and possession. If the notice period ends without payment, the lender’s lawyer typically starts a court action for the debt and for possession of the property. If the homeowner does not defend it, the lender can obtain a judgment and a writ of possession.
- Eviction and listing. With a writ of possession, the sheriff can require the occupants to leave. The lender then has the property appraised, lists it and sells it. Ontario law expects the lender to take reasonable steps to obtain a fair price rather than simply covering its own debt.
- Distribution of proceeds. Sale proceeds pay the first mortgage and enforcement costs, then subsequent mortgages and registered creditors, and any surplus is paid to the former owner.
A step-by-step breakdown with typical durations is in our power of sale timeline in Ontario post.
What “Sold Under Power of Sale” Means on a Listing
If you are searching for homes to buy and see “sold under power of sale” or “power of sale” in a listing, it means the lender, not the owner, is the seller. A few things follow from that:
- The lender has usually never lived in the home and will sell it “as is, where is,” with the standard seller warranties removed from the agreement.
- The lender’s lawyer prepares the agreement of purchase and sale, and the closing can be delayed if the former owner redeems the mortgage before closing.
- The price is set by appraisal and the market, not by a distressed discount. Lenders have a duty to sell for a fair price, so deep bargains are less common than people expect.
Your Options If You Have Received a Notice of Sale
The notice period exists so the homeowner has time to act. These are the paths most homeowners consider, roughly in order of how much they preserve.
1. Bring the mortgage current
Paying the arrears and the lender’s costs stops the process. Canada’s federal housing agency lists arrangements a lender may consider, including a payment deferral, a longer amortization or adding the arrears to the mortgage balance, on its page on what to do if you cannot pay your mortgage. The earlier you call the lender, the more of these are usually available.
2. Refinance or replace the mortgage
If the home has enough equity, a new lender may pay out the existing mortgage. Private lenders will sometimes do this when a bank will not, at a higher cost. A mortgage broker can tell you quickly whether this is realistic.
3. Sell the property yourself
Until the lender’s sale closes, you generally keep the right to sell your own home. Selling it yourself, rather than letting the lender sell it, usually means lower enforcement costs coming off the top, more control over the price and no eviction. A conventional listing can work if there is enough time. When there is not, a direct sale to a cash buyer that can close within the notice period is often the practical route. Our post on how to stop a power of sale in Ontario walks through what that looks like.
4. Let the lender’s sale proceed
If none of the above is possible, the sale goes ahead and any surplus is returned to you after the mortgage and costs are paid. Enforcement costs, legal fees and commissions reduce that surplus compared with a sale you arrange yourself.
What Happens to Your Equity
Because power of sale returns the surplus to the homeowner, the equity you have built is not automatically lost. It is reduced by everything the lender is entitled to deduct: arrears, interest at the mortgage rate, legal fees, appraisal and listing costs, and commissions on the sale. The longer the process runs, the larger those deductions become, which is why the timing of any decision matters more than the decision itself. Our guide on what homeowners need to know before it is too late looks at this in more depth.
Where GTA House Buyers Fits
GTA House Buyers has been buying homes across the Greater Toronto Area and more than 40 Ontario cities since 2003 and is BBB accredited with an A+ rating. When a homeowner in the notice period wants to sell rather than wait for the lender, we can make a written cash offer, close in as fast as 5 days if needed, and coordinate with both lawyers so the mortgage is discharged on closing. There are no commissions or fees, we buy the home as it stands, and there is no obligation to accept.
Frequently Asked Questions About Power of Sale in Ontario
What does power of sale mean?
It is the right, written into most Ontario mortgages, that lets a lender sell the property if the borrower defaults. The lender sells the home, pays off the mortgage and costs, and returns any surplus to the homeowner.
Is power of sale the same as foreclosure?
No. In a foreclosure the lender takes ownership of the property and the homeowner generally loses any equity. In a power of sale the lender sells the home and the homeowner receives any surplus. Power of sale is far more common in Ontario.
How long does a power of sale take in Ontario?
The Mortgages Act requires at least 15 days of default before a Notice of Sale and at least 35 days of notice before the lender can proceed. After that, obtaining possession and completing a sale typically adds several more months. See our timeline post for the usual sequence.
Can I still sell my house during a power of sale?
Generally, yes. Until the lender’s sale closes you remain the owner and can sell the property yourself, provided the mortgage is paid out from the proceeds at closing.
Do I have to move out as soon as I get a Notice of Sale?
No. The notice starts a waiting period. A homeowner is only required to leave after the lender obtains a court order for possession and it is enforced.
What happens to the money left over after a power of sale?
After the mortgage, arrears, interest, legal and sale costs, and any other registered creditors are paid, the remaining amount is returned to the former homeowner.
What does “sold under power of sale” mean for a buyer?
The lender is the seller. The property is sold as is, the lender’s lawyer prepares the paperwork, and the sale can be cancelled if the original owner redeems the mortgage before closing.
Should I talk to a lawyer?
Yes. This article describes the process in general terms only. A real estate or mortgage-enforcement lawyer can review your notice, confirm your deadlines and explain your rights under the Mortgages Act.
Need to Talk Through a Power of Sale Situation?
GTA House Buyers has bought homes at every stage of the power of sale process since 2003. If you have received a demand letter or a Notice of Sale and want to know what a direct cash sale would look like, call (647) 848-7790 or contact us online. No commissions, no fees, no obligation.