Owning a home is a major milestone, but it also comes with heavy financial responsibilities. Beyond your monthly mortgage payments, you have to manage property taxes, home insurance, and ongoing maintenance.
If life throws a curveball and you fall behind on these obligations, your mortgage lender has legal avenues to recoup their money. In Canada, the most common route lenders take is a process known as a power of sale.
What Is a Power of Sale?
A power of sale is a legal clause in a mortgage contract that gives the lender the right to sell the property if the borrower defaults on their payments. This process allows the lender to recover their outstanding debt without the need for lengthy court supervision.
While a missed payment is the most common trigger, a lender can also initiate a power of sale if a homeowner fails to pay property taxes, keep active home insurance, or maintain the property to a reasonable standard.
Power of Sale vs. Foreclosure: What’s the Difference?
Many Canadians use the terms "power of sale" and "foreclosure" interchangeably, but they are entirely different legal processes.
The biggest difference lies in who owns the property and who gets to keep the home’s remaining equity.
| Feature | Power of Sale | Foreclosure |
| Who Owns the Property? | The homeowner retains the legal title, but the lender has the right to sell it to recover their funds. | The lender takes full legal ownership (title) of the property. |
| Who Keeps the Equity? | The Homeowner. Any profit left over after paying off the mortgage debt and legal fees goes back to you. | The Lender. The lender keeps the property and all profit from a future sale. |
| How Long Does It Take? | Fast. Typically resolved in weeks to a few months without court intervention. | Slow. Usually takes over six months because it requires the provincial court system. |
| Who Pays Remaining Debt? | If the sale doesn't cover the mortgage, the borrower is still on the hook for the shortfall. | The lender generally takes the loss (though this varies by province). |
Which Canadian Provinces Use Power of Sale?
The legal process your lender will use depends entirely on where your property is located.
Power of Sale Provinces: Ontario, Prince Edward Island, New Brunswick, and Newfoundland and Labrador.
Foreclosure Provinces/Territories: British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, and the three territories.
How Does the Power of Sale Process Work? (The Timeline)
A lender cannot simply lock you out of your house overnight. Homeowners must be notified in writing well in advance, and the timeline varies strictly by province:
Ontario: Lenders must wait at least 15 days after a default to issue a Notice of Sale under Mortgage. Once issued, the homeowner has a 35-day redemption period to pay the arrears before the lender can list the property.
Newfoundland & Labrador & New Brunswick: Lenders must provide a minimum of two weeks' notice.
Prince Edward Island: Notice periods are evaluated on a case-by-case basis.
For Homeowners: Can You Stop a Power of Sale?
Receiving a Notice of Sale is incredibly stressful, but it is not the end of the road. You have options to save your home during the redemption period:
Pay the Arrears: If you can catch up on your missed payments and cover the lender’s legal fees, the mortgage will be reinstated.
Refinance with an Alternative Lender: Traditional banks may turn you down if you've missed payments, but alternative B-lenders or private lenders specialize in helping homeowners rescue their equity.
Sell the Home Yourself: Selling the home yourself on the open market almost always yields a higher sale price—and more remaining equity for you—than letting the bank rush a sale.
🆘 Facing a Power of Sale? We Can Help.
You don’t have to go through this alone. Our expert advisors at Homewise can help you explore alternative refinancing options to pay off your arrears, protect your credit, and keep your home.
For Buyers: Is a Power of Sale Home a Good Deal?
Many home buyers and real estate investors hunt for "power of sale" listings hoping to score a massive discount. However, buying a distressed property in Canada comes with unique rules:
1. You Might Not Get a "Steal"
By law, Canadian lenders are obligated to sell a power of sale home for fair market value. They cannot simply fire-sale the home to the lowest bidder. They must list it on the MLS, obtain home appraisals, and prove they tried to get the best price possible to protect the borrower's equity.
2. Properties Are Sold "As-Is, Where-Is"
This is the biggest risk for buyers. The previous owner is not required to make any repairs, clean the property, or even leave the appliances. If you discover a cracked foundation or a mold issue after closing, you have no legal recourse against the lender.
🔑 Buying a Distressed Property? Get Pre-Approved First.
Power of sale homes often sell quickly, and lenders will not wait around for financing conditions. Having a rock-solid pre-approval in hand gives you the leverage you need to secure the property.
FAQs
Can a homeowner stop a power of sale at the last minute?
Yes. In most Canadian provinces, you have the legal right to stop the process up until the very moment the property transfer is finalized with a new buyer. However, to do this, you must "cure the default," which means paying the entire overdue mortgage balance, any accrued interest, and the lender’s mounting legal and administrative fees.
Does a power of sale ruin your credit score?
It will significantly damage it. The process involves multiple missed payments and a legal default, both of which are heavily penalized by credit bureaus (Equifax and TransUnion). A power of sale will stay on your credit report for up to six to seven years, making it difficult to qualify for a prime mortgage in the near future.
Can I buy a power of sale property with a standard mortgage?
Yes, but there is a catch. Traditional lenders (like big banks) will happily finance a power of sale home if it is in good, livable condition. However, because these homes are sold "as-is," if the previous owner damaged the property or stripped the interior, an A-lender might reject the property. In those cases, you may need an alternative or private lender to secure the deal.
Who pays the real estate commission and legal fees in a power of sale?
The defaulting homeowner ultimately pays for everything. While the lender hires the real estate agent and the lawyers to handle the transaction, all of those expenses are deducted directly from the sale proceeds before any remaining equity is handed back to the homeowner.
