Share article
Share article
Summary: Foreclosure is a court process in which a lender takes ownership of a home after a mortgage default. In Ontario it's rare: lenders almost always use power of sale instead, which is faster, cheaper, and returns any surplus to the homeowner. A foreclosure runs through the Superior Court of Justice under the Mortgages Act.
What is foreclosure?
Foreclosure is a court-supervised process that ends with the lender taking ownership of a mortgaged home. When a borrower defaults, the lender asks the court to extinguish the borrower's "equity of redemption," the right to pay off the mortgage and keep the property. Once the court grants a final order of foreclosure, title transfers to the lender, and the borrower loses both the home and any equity built up in it.
The defining feature is that the lender ends up owning the property rather than selling it. That's the key contrast with power of sale, where the lender sells the home to a third party and returns any leftover money to the homeowner.
How is foreclosure different from power of sale?
Both are remedies a lender can use after a default, but they work differently and lead to different outcomes for the homeowner.
Foreclosure | Power of sale | |
Court involved? | Yes, always a court action | Usually out of court (contractual) |
Who ends up with the home | The lender takes ownership | Sold to a third-party buyer |
Any surplus to you | No, the lender keeps the property and its value | Yes, surplus is returned after costs and the debt |
Shortfall (deficiency) | Generally can't also pursue you; taking the home settles the debt | Can pursue you for the shortfall |
Speed and cost | Slower and more expensive | Faster and cheaper |
How common in Ontario | Rare | The standard remedy |
For the full breakdown of how power of sale works, including the notice rules and the ways to stop it, see our guide to power of sale in Ontario.
How does foreclosure work in Ontario?
A foreclosure is a lawsuit, so it moves at the pace of the courts. The general path:
Default. You fall behind on payments (or breach another mortgage term, such as failing to pay property taxes or insure the home).
Statement of Claim. The lender starts a court action in the Superior Court of Justice by issuing and serving a Statement of Claim for foreclosure. Mortgage actions follow Rule 64 of the Rules of Civil Procedure.
Redemption period. The court sets a period during which you, or anyone else with an interest in the property, can redeem the mortgage by paying what's owed plus the lender's costs.
Request for sale. During that period, you or another interested party can ask the court to convert the action into a judicial sale instead of a foreclosure, so the home is sold and any surplus is preserved.
Final order of foreclosure. If no one redeems or requests a sale, the court grants a final order. Title vests in the lender, and the borrower's right to the property is gone.
Because a final order of foreclosure is the lender taking the home in place of the debt, it generally can't also pursue you for a shortfall: suing you on the mortgage covenant after foreclosure would reopen your right to redeem the property. That's the reverse of power of sale, where the lender can come after you for a deficiency if the sale doesn't cover the balance.
Why is foreclosure rare in Ontario?
Power of sale is faster, cheaper, and doesn't require seeing a lawsuit through to judgment, so it's the remedy nearly every Ontario lender reaches for. Foreclosure also caps the lender's recovery at the value of the home: if the property is worth less than the debt, the lender can't both keep the house and pursue the borrower for the difference. And because any defendant can ask the court to turn a foreclosure into a sale, even an action that starts as a foreclosure often ends as a judicial sale. Lenders mainly consider foreclosure when there's substantial equity in the home that they would rather take directly.
What should you do if you're behind on your mortgage?
Whichever remedy your lender might use, the earlier you act, the more options you keep. Most lenders would rather work with you than enforce against you, and the choices that preserve the most equity, refinancing or selling on your own terms, are only available before the process is well underway.
Talk to your lender early. Before you miss a payment, ask about a temporary deferral, an interest-only period, or a longer amortization to lower the monthly cost.
Refinance while your credit is intact. Refinancing with a new lender can reset your payment to a manageable level. See what a real estate lawyer does in a refinance.
Sell on your own terms. A voluntary sale almost always preserves more equity than a lender-led one.
If you're already facing an active foreclosure or power of sale, you'll usually need a mortgage-enforcement or litigation lawyer, which is a different practice from residential closings. A closing-focused firm fits in earlier, at the moments you're signing or restructuring the mortgage itself.
Frequently asked questions
Is foreclosure common in Ontario?
No. Power of sale is the standard remedy because it's faster and cheaper, so true foreclosures to a final court order are uncommon. Many actions that begin as foreclosures are converted into judicial sales.
Does foreclosure mean the bank owns my home?
Once the court grants a final order of foreclosure, yes. Title transfers to the lender and your right to redeem the mortgage and keep the property ends.
Can I keep any equity in a foreclosure?
No. In a foreclosure the lender takes the home and its full value, even if that value is more than what you owe. To preserve surplus equity, you (or another interested party) can ask the court to convert the action into a sale instead.
Can the lender come after me for the shortfall?
Generally not. By taking the home through foreclosure the lender takes it in place of the debt, and suing you for a shortfall afterward would reopen your right to redeem the property. That's different from power of sale, where the lender can pursue you for a deficiency if the sale doesn't cover the balance.
How long does foreclosure take in Ontario?
Longer than a power of sale, because it's a court action. The exact timeline depends on the court's schedule, whether anyone requests a sale, and whether the action is defended.
Can I stop a foreclosure?
Often, yes, especially early. You can redeem by paying the arrears and costs, refinance, sell, or ask the court to order a sale. The options narrow as the action proceeds, so getting advice quickly matters.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law. We help buyers and sellers with purchase closings, sales, and refinancing, pairing a digital platform that tracks every milestone with an in-house legal team you can reach by chat, email, or video call. You can start your closing online or get in touch with any questions.
Legal references: Mortgages Act, R.S.O. 1990, c. M.40; Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 64 (mortgage actions).
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
