If you’ve fallen behind on your mortgage payments—or are at risk—it’s important to understand more than just how to stop a power of sale. Mortgage arrears are serious, but not always irreversible. Here’s what many borrowers overlook when navigating arrears in Ontario.
1. What Counts as Being in Arrears
You’re considered “in arrears” as soon as you miss a full mortgage payment, including both principal and interest. Some lenders may give you a grace period, but technically, even one missed payment is a breach of your mortgage contract.
2. How Lenders Typically Respond
Lenders follow a staged approach before initiating legal action:
| Days After Missed Payment | Lender Action |
|---|---|
| 1–15 days | Reminder or courtesy call/email |
| 15–30 days | Formal notice of missed payment |
| 30–60 days | Collection efforts intensify |
| 60+ days | Legal action may begin (Notice of Sale) |
Even if you’re talking to your lender, interest and penalties continue to accrue during this time.
3. Penalties and Fees Add Up Fast
Beyond the missed payment itself, lenders may charge:
- Late fees (flat amount or interest)
- NSF charges if payment bounces
- Legal fees if a Notice of Sale is issued
- Administrative charges for collection letters
These fees are added to your mortgage balance, increasing the amount required to bring the account current.
4. Your Credit Score Will Be Impacted
Mortgage arrears are reported to credit bureaus as late or missed payments, often after 30 days. This can:
- Lower your credit score significantly
- Impact your ability to refinance
- Stay on your report for up to 6 years
Even one missed payment can affect your interest rates on future borrowing.
5. The Timeline to Legal Action
In Ontario, the lender can issue a Notice of Sale as early as 15 days after default—but most wait until 60–90 days. This begins the power of sale process.
Here’s what happens next:
- You’re given 35 days to bring your mortgage back into good standing (the “redemption period”)
- If unpaid, the lender can move to evict and sell your home
- You may still owe deficiency payments if the home sells for less than the balance owing (plus fees)
6. Arrears on Second or Third Mortgages
Missed payments on second or third mortgages can be even riskier. These lenders may:
- Issue a Notice of Sale independently of your first lender
- Add penalties and legal fees quickly
- Force a sale to protect their position
This can trigger default on your first mortgage as well, even if you’ve been paying it faithfully.
7. How Arrears Affect Refinancing Options
If you’re in arrears, refinancing becomes much harder:
- Most banks won’t approve a new mortgage if you’re behind
- Private lenders might still approve you—but at higher interest rates (8%–14%)
- You’ll need sufficient home equity and often a broker to package the deal quickly
8. Tenants and Rental Properties
If you’re in arrears on a rental property, tenants may receive notices as part of the legal proceedings. While tenants are not responsible for your mortgage, a power of sale could lead to their eviction. This can add pressure and complexity to your situation.
9. You Have the Right to Reinstate
Ontario borrowers have the right to reinstate their mortgage any time before the property is sold. This means paying:
- All missed payments
- Late fees
- Legal and admin costs
Once reinstated, the lender must stop all legal action—but it may take time to repair the damage to your credit and standing.
10. Options if You Can’t Catch Up
If reinstating isn’t possible, you can explore:
- Selling the home privately to preserve equity
- Arranging a second mortgage to clear arrears
- Consumer Proposal or Bankruptcy (in severe cases)
- Voluntary foreclosure or “deed in lieu of sale” (rare in Ontario)
Final Thoughts
Mortgage arrears aren’t the end—but they do require swift, informed action. Every missed day adds interest, legal costs, and credit damage. If you’re falling behind, it’s critical to:
- Contact your lender early
- Speak with a mortgage broker about your options
- Review your budget and make a financial recovery plan
Don’t wait until a Notice of Sale arrives to ask for help—the earlier you act, the more solutions you’ll have. If you would like to speak to a local mortgage broker fill in a form below.
