Power of Sale vs Foreclosure in Ontario: What Borrowers Should Know

Power of Sale vs Foreclosure in Ontario | Key Differences Explained

Two Ways Lenders Enforce Mortgages

In Ontario, lenders can enforce mortgages through two primary methods:

1. Power of sale
2. Foreclosure

While both processes allow lenders to recover unpaid mortgage debt, they operate very differently.

What Is Power of Sale?

Power of sale allows a lender to sell the property to recover the mortgage debt without taking ownership of the property.

Key features include:

• borrower receives a Notice of Sale
• borrower typically has 35 days to remedy the default
• lender sells the property through MLS or private sale
• surplus funds (after the mortgage debt is paid) go to the borrower

Power of sale is the most common mortgage enforcement method in Ontario.

What Is Foreclosure?

Foreclosure is a court process where the lender takes ownership of the property instead of selling it.

Key features include:

• the borrower loses ownership permanently
• the lender becomes the registered owner
• the borrower typically loses any equity in the property

Foreclosure is less common in Ontario because lenders generally prefer power of sale, which allows them to recover their debt more quickly.

Key Differences Between Power of Sale and Foreclosure

Feature	Power of Sale	Foreclosure
Property ownership	Borrower retains ownership until sale	Lender becomes owner
Sale process	Property sold on market	No sale required
Borrower equity	Borrower receives surplus funds	Borrower may lose equity
Common in Ontario	Yes	Rare

Why Most Ontario Lenders Use Power of Sale

Power of sale is usually preferred because:

• it is faster than foreclosure
• lenders recover debt quickly
• properties can be sold through the open market

For borrowers, power of sale may be less severe because any surplus from the sale must be returned to the borrower.