You Received a Notice of Sale Under Mortgage in Ontario: What It Means and What You Can Still Do

What a Notice of Sale Under Mortgage Is and Who Sends It

A Notice of Sale Under Mortgage is sent by the mortgage lender, or by the lender's lawyer, when the lender intends to use the power of sale in the mortgage. A homeowner who has one should read it with a lawyer as soon as it arrives.

A lender can give a notice of sale only after a default under the mortgage has continued for at least fifteen days, and cannot sell the home until at least thirty-five days after the notice was given (Mortgages Act, section 32).

The notice is given by personal service, by registered mail to the person's usual or last known address, or by leaving it at that address (Mortgages Act, section 33). A notice sent by registered mail counts as given on the day it was mailed, so the waiting period can start before the letter arrives (section 34).

The lender has to give the notice to everyone the land registry shows as having an interest in the property, such as the owners and subordinate lenders, but not to those whose interests rank ahead of its own mortgage (Mortgages Act, section 31).

What the Homeowner Can Still Do Before the Lender Sells

The homeowner can still choose between these options. The earlier the homeowner chooses, the more of them are still open.

In Stonefield Capital's experience, the earlier in mortgage enforcement a homeowner starts negotiating, the more money is left, because interest, legal fees and the other costs have had less time to build. At the Notice of Sale stage, most of those costs have not been added yet.

1. 1

   Bring the mortgage back into good standing

   Where a missed payment has made the whole mortgage due before the end of its term, the homeowner can, despite what the mortgage says, pay what is actually in arrears and the lender's necessary expenses at any time before the sale, and is then relieved of the default (Mortgages Act, section 22). Once the mortgage's term has ended, the whole balance is due in any case and has to be paid. The homeowner can ask the lender in writing for a statement of the amount in arrears and the lender's expenses. The lender has to answer within fifteen days of receiving the request; if it does not, without a reasonable excuse, or the answer is incomplete or wrong, its rights to enforce the mortgage are suspended until it answers properly (Mortgages Act, section 22).

2. 2

   Refinance where there is equity

   Where there is equity left after the arrears and the lender's costs, a new private mortgage can pay out the lender. The guide to stopping a power of sale with a private refinance explains how that works.

3. 3

   Sell the home on the open market

   The homeowner can list the home with a realtor and sell it before the lender does, paying the lender out of the sale. Where a notice or demand requires payment of everything secured by the mortgage, the lender has to accept that payment if it is made as the notice requires (Mortgages Act, section 43).

4. 4

   Agree an early sale with the lender

   Where the mortgages, arrears and costs add up to about what the home is worth, an early agreed sale can end the process before the lender sells the home itself. Stonefield Capital can introduce a buyer and put that buyer's proposal to the lender with the homeowner's written permission. The agreement can include a payment for moving costs or the first months' rent at a new home. No payment is promised, and the lender may say no.

What Happens If the Homeowner Does Nothing

If the homeowner does not act, the lender's sale goes ahead at the lender's pace and price, and the costs of the process keep being added to what is owed.

The guide to what happens after a power of sale covers the lender's sale, leaving the home, and the money.

Where a First Mortgage and a Second Mortgage Differ in Practice

Each mortgage's power of sale arises on a default under that mortgage (Mortgages Act, section 32), so a second-mortgage lender can give its own notice of sale when the second mortgage is in default, even while the first mortgage is paid up, and it sells subject to the interests that rank ahead of it, such as the first mortgage (section 31).

For the homeowner, this means a notice can come from the second-mortgage lender alone. The same options are worth looking at: the arrears on the second mortgage paid, the second mortgage refinanced, or the home sold.

What Stonefield Capital Can Do, Step by Step

1. 1

   A first look at the figures

   Stonefield Capital reads what the homeowner sends through the form below: the balances, the estimate of value and any lender documents, and compares what is owed with what the home would sell for.

2. 2

   A plain answer on which option fits

   Stonefield Capital tells the homeowner which option fits the situation, including when a refinance or an open-market sale fits better than an early agreed sale.

3. 3

   A buyer and a proposal to the lender, only with written permission

   Where an early agreed sale fits, Stonefield Capital can introduce a buyer for the home and put that buyer's proposal to the lender, only after the homeowner gives written permission. The agreement can include a payment to the homeowner for moving costs or the first months' rent at a new home. Stonefield Capital is paid by the buyer, not by the homeowner.

4. 4

   The homeowner decides

   Nothing is agreed until the homeowner signs, and the homeowner should get independent legal advice before agreeing to anything. Stonefield Capital does not give legal advice, and Stonefield Capital cannot make a lender agree: the lender may say no.