Foreclosure Rules in Ontario Could Be Driving Up Your Rate

Ontario's foreclosure rules are piling on extra costs.

The province has introduced stronger homeowner protections in recent years and months, resulting in long delays at several points in its Power of Sale process that have drastically altered timelines.

Real estate lawyers, such as George Kyriazakos, based in Windsor, Ontario, are seeing more homeowners entering default due to financial challenges, while delays in the process add unnecessary costs and more lending risk.

Like most provinces, Ontario lenders are leaning on Power of Sale (which includes the right of redemption for the defaulting homeowner) to deal with mortgage default rather than judicial foreclosure. It's normally faster and requires less court involvement because the homeowner remains on the title of the home during the process — and receives any remaining equity after creditors are paid.

Ontario's Power of Sale procedure used to have one of the fastest resolution times in the country at an average of 4 months, compared to over 6 months in other provinces.

But now, that process is being pushed out to a year or two.

An ongoing legislative push may be trying to protect defaulting homeowners, but in reality has introduced greater uncertainty and complexity than in other provinces, all of which are translating into higher costs for all mortgage borrowers in the province.

How are the delays raising costs for Ontario mortgage borrowers?

According to Kyriazakos, just the legal fees alone in a Power of Sale can start at $2,000 and run into the 10's of thousands if the process drags on longer than usual. Multiply that by a 90.2% surge year-over-year in Ontario's 90-day-plus mortgage delinquency rate in Q4 2024, far outpacing every other province in Canada — and the cumulative risk exposure for lenders becomes significant.

Those delays and additional expenses have knock-on cost effects for home financing solutions across the province:

• Stricter traditional mortgage qualification rules — more home borrowers are turning to alternative or private lenders that charge higher rates and fees.
• Harder to refinance. More often, refinancing solutions for those in default are rejected due to additional processing costs not included in the loan.
• Defaulting homeowners are turning to more costly, riskier private lending solutions to try to keep their homes.
• Less equity (if any) left over for defaulting homeowners, with a growing risk of still owing after the home sale.
• Higher mortgage rates priced in across the mortgage landscape.

How does Ontario's longer default process affect mortgage rates?

Mortgage rates aren't set in a vacuum. Lenders price risk into the rates they offer, and default risk is one of the most direct inputs. In a normal market, lenders set fixed mortgage rates at a spread of roughly 1-2% above Government of Canada bond yields, and variable-rate discounts at about 0.7-0.9% off the prime rate, accounting for funding costs, operating expenses, and credit risk.

Those spreads are fluid — and widen (fixed rates) or narrow (variable discounts) when lenders perceive more risk on the horizon, including costly or slow-to-resolve defaults.

Ontario's Financial Services Regulatory Authority (FSRA) has explicitly noted that private lenders already factor foreclosure-related costs directly into their rates and fees.

The same principle applies more broadly for traditional and other alternative lenders in Ontario. When lenders face greater uncertainty about recovering their funds, it can result in a premium of up to 0.15% priced into rates with traditional lenders across the board.

That extra 0.15% on a 5-year fixed rate, with a $500K mortgage and 25-year loan, can cost over $3,500 more over the term.

Why is the Power of Sale process taking even longer in Ontario?

In Ontario, a traditional Power of Sale timeline of 3 to 6 months is stretching out to well past a year, even two. Several factors driving this extension include:

1. Court backlogs are adding 6-9 months. A recent amendment to Ontario's court procedures now requires mortgage enforcement cases to be filed locally — eliminating the option of faster, less congested courts elsewhere in the province, on the grounds that homeowners shouldn't have to travel. What once took 1–2 months has ballooned in high-volume areas like the GTA.

"Those longer court delays seen in the GTA will start to show up in courts in the less-dense centres within 6 months," states Windsor-area lawyer George Kyriazakos, who regularly deals with default proceedings.

2. Bill 60 is adding another 3-5 months. The Fighting Delays, Building Faster Act (2025) was intended to speed up evictions from rental properties. In practice, it triggered a wave of new filings that overwhelmed the same Sheriff's offices responsible for enforcing mortgage-related Writs of Possession, pushing the backlog into late 2026. The Writ of Possession must now also be filed in the same court as the original default notice.

3. Sheriff wait times are a further 3-5 months. Once a lender secures a court order, it must be enforced by the local Sheriff's office. In high-volume areas like Toronto, Brampton, and Milton, wait times for a physical eviction have grown from a few weeks to months.

4. Slow market conditions are adding 2-3 months. With more homes for sale than at any point in the last 15 years, lenders are required to keep defaulted properties listed far longer than usual to prove they made a genuine effort to get fair market value — a legal obligation that adds more time to the process.

What is the difference between Power of Sale and foreclosure in Ontario?

What most people call foreclosure is technically two different processes — and the distinction matters for both the lender and the homeowner.

POWER OF SALE is now the most commonly used default process in Ontario. It allows lenders to force the sale of a home to recover on a defaulted loan, while the homeowner remains on title and can exercise the right of redemption (see below).

Any proceeds left over after the sale (if any) go back to the homeowner once the mortgage balance, arrears, and legal costs are paid out — but the homeowner is also responsible for any shortfall if the sale doesn't fully cover the debt.

This process is usually faster, cheaper, and less court-dependent than foreclosure, ideally wrapping up in a few short months. If the process drags on or a right of redemption stops the sale, costs charged to the homeowners can start adding up.

FORECLOSURE is a full judicial default process. The lender files a lawsuit against the homeowners, a judge oversees everything, and the court transfers the home's title to the lender.

The lender then owns the property outright, sells it, and keeps all proceeds — the homeowner walks away with nothing, even if the property had significant equity. It's traditionally slower, often taking a year or more, and usually more expensive for everyone involved.

The foreclosure process, however, typically only comes into play when there's little to no equity in the property — meaning a Power of Sale wouldn't recover the debt anyway.

Does a homeowner benefit from the right of redemption in Ontario?

The right of redemption is one of the most significant — and least understood — protections Ontario homeowners have.

Under Section 22 of the Mortgages Act, a homeowner in default can stop the entire Power of Sale process at any point before the sale officially closes by refinancing or paying off the debt.

This right of redemption means that even after the property is listed, even after a buyer's offer is accepted and a purchase agreement is signed, the homeowner can still reclaim their home. The sale stops cold the moment that payment is made. Title transfer at closing is the only point in the process of no return.

It seems like meaningful protection for a homeowner desperate to keep their home, but is it? Let's take a look.

Lower list price means less equity to pay creditors.

Because buyers can lose deposits and face disrupted plans with no legal recourse, Power of Sale homes are usually listed 10-20% below market price (which can still be considered fair market value).

For a homeowner in default counting on the sale proceeds, a lower sale price can mean the difference between walking away with equity, walking away with nothing, or still owing an amount once the sale pays out creditors.

More expenses for the homeowner who defaulted.

Resolving the current default amount doesn't resolve the homeowner's situation entirely. Stopping a sale through the right of redemption incurs additional fees that are passed on to the defaulting homeowner, who is already in financial difficulty and now owes more.

For example, in the Greater Toronto Area, total redemption costs can climb into the six figures due to lengthy delays in Power of Sale proceedings.

How does the Power of Sale process work in Ontario?

Ontario's Mortgages Act governs the process and follows a specific legal timeline:

• A lender can issue a Notice of Sale as early as 15 days after a missed payment
• Once served, the homeowner enters a redemption period of at least 35 days (40 days for married couples) to pay all arrears and costs — during which the lender can't proceed with a sale
• If the default remains unresolved, the lender can proceed with a Statement of Claim, which the homeowner can contest through the right of redemption, potentially adding more court time to the process
• Once resolved and the homeowner vacates the property( or is evicted), the lender lists the property for sale
• From first missed payment to sale closing, the whole process historically took about 4 months — but timelines in Ontario are now regularly stretching to 14 months or more

How does the Foreclosure process work in Ontario?

Foreclosure is usually only pursued when there is little or no equity in the property:

• The lender files a Statement of Claim with the court and serves the homeowner with a copy
• A homeowner can contest the filing, which delays the process.
• If the appeal is denied or resolved and the mortgage remains in default, the court transfers title directly to the lender
• The lender owns the property outright and keeps all proceeds from any future sale — the homeowner loses all equity
• The full process typically takes a year or more due to court oversight

No matter the process, a full mortgage default is not a happy ending.

Whether the default process resolves within a normal timeframe or an extended one (resulting in a further cost run-up), the homeowner faces a challenging financial situation moving forward:

1. Credit rating is destroyed.
2. Defaulting on a mortgage can inhibit purchasing power for years.
3. Future financing from a mortgage lender is difficult or impossible to secure.
4. Loss of equity — that could have been avoided by selling the home before entering the default process.

Is it easier for the homeowner to sell rather than enter the default process?

Significant life events are usually behind mortgage default — death of an owner or co-owner, severe illness, divorce or job loss, rather than simply an unwillingness to pay (though it does happen).

Selling the home before a lender's intervention can be the simplest, most cost-effective way to come out financially ahead. However, emotional and financial complexities (such as a decline in market value) can interfere with this pathway.

Ontario's Homeowner Protection Act 2024: what else has changed for borrowers?

Ontario's Homeowner Protection Act came into force on June 6, 2024, reinforcing the province's broader legislative direction toward stronger borrower protections. Among its key changes:

• A 10-day cooling-off period was introduced for buyers of new freehold homes, giving purchasers time to review agreements before committing.
• Consumer Notices of Security Interest (NOSIs). Any liens that contractors could register against a home for financed products, such as HVAC systems, were deemed expired, removing a tool used to trap homeowners in high-cost financing arrangements.

While the Act didn't directly extend Power of Sale or redemption periods, it reflects a consistent legislative pattern — Ontario continues to strengthen the legal footing of homeowners relative to lenders, other creditors, and even home sellers.

The rules likely make sense for homeowners. But for lenders, that pattern carries a cost that can be passed on to their mortgage customers.

Can foreclosure rules affect home prices in Ontario?

For the home buyer, Power of Sale listings typically come to market 'as is' and at 10–20% below comparable properties — still considered to be fair market value.

It may seem like a great deal for a home buyer, but because of the right-of-redemption protections for the homeowner, many buyers are wary that the deal could fall through at the last minute (the risk is statistically low, but it's there all the same).

In Ontario housing markets overall, Power of Sale homes usually don't affect home prices. However, a listing in a neighbourhood may result in a slight price push for nearby homes — a home not being sold through a default process is usually more appealing to buyers who want greater certainty in their purchase, which may be reflected in sale prices.

Your home? Let's keep it that way.

At True North Mortgage, we have more flexibility than a bank, both for your best rate and finding the right mortgage fit to help you through — even if you have more complex mortgage needs that don't fit the traditional lending mould.

We're here to help, and we're salaried (non-commissioned) for the unbiased advice that puts you first, not the lender.

Our team of experts can work with you, taking a more comprehensive look at your details to offer solutions and transparency that can help reduce your costs and stress, and stay ahead instead of falling behind.