September 8, 2026
It was William Shakespeare, in his play Hamlet, who coined the saying “neither a borrower nor a lender be.”
Sound advice if you want to avoid problems, but not very practical in today’s world.
Whether you are buying a home, financing a business, or helping out a family member, you may be asked to sign a mortgage. No one signs a mortgage intending to default. But it happens.
THE ISSUE
What happens if you default on the mortgage?
The lender’s first effort to collect is usually to take possession of the property and try to sell it to pay off the debt. This is a very bad thing if it is secured against the family farm, or your home.
Often, the sale does not fully pay off the debt and related costs. In that situation, you may be called upon personally to pay off the balance owing from your other assets, or even your future income. This applies not only to personal covenants, which are included in almost all mortgages, or where you are a guarantor. We have written previously about how the courts take personal guarantees very seriously.
Courts treat all debt obligations very seriously. In almost all cases, the lender is successful in obtaining judgment against the debtor or guarantee. Cases where a debtor or guarantor can convince a judge that the obligation is not valid or enforceable are exceptionally rare.
Yes, you really can lose your home or your retirement savings, or have your future income seized through the garnishment process to repay the debt.
THE CASE
The law has not become any more friendly towards debtors or guarantors who receive a demand for payment.
Judges certainly have not, as is illustrated by the Superior Court decision in Equitable Bank v. Bal. What is noteworthy about this decision is that it ought not to have been noteworthy.
The facts are not unusual. The defendants signed a one-year mortgage with the bank. It was renewed twice, at higher interest rates. They stopped making payments. The Bank sued. The defendants did not defend. The Bank obtained default judgment.
This proceeding involved two motions:
- A motion by the defendants to set aside the default judgment and allow them to defend, on the basis that they had not read the mortgage or understood their obligations.
- A motion by the Bank for summary judgment.
The judge denied the defendants’ motion and allowed the bank’s motion.
Not surprising.
Courts expect people to read legal agreements before they sign them. Signing indicates that you understood.
Yet this case was reported in the weekly publication provided to all Ontario lawyers – the cases that the editors believe every lawyer in Ontario, regardless of practice area, ought to be aware of.
So, why was this brought to the attention of every lawyer in Ontario?
We cannot read the editors’ minds, but we suspect that it might because of the way that the judge decided the motions. The judge gave only brief reasons for the decision. This is not unusual in collection cases. What is unusual is how blunt the judge was about why they reached their decision, saying:
The Defendants’ pattern of conduct is not only delaying the inevitable; it makes a mockery of mortgage lending and enforcement.
If all a defaulting Defendant/debtor needed to do to avoid or delay judgment and enforcement in a mortgage action was to allege that it did not properly review or care to understand the details of the loan renewals it had signed, the efficiency and reliability of mortgage lending and enforcement would be very much undermined. This would serve to bring the administration of justice into disrepute. It would also endanger the integrity of mortgage lending which is unquestionably the most practical means by which many home buyers are able to acquire their residences.
…
The Defendants’ evidence is not compelling or credible. The defence of non est factum is untenable. The suggestion that the Defendants cannot be held to the written agreements and obligations they entered is nothing short of ludicrous.
Judges seldom use terms like “mockery” or “ludicrous”.
This is said to send a very clear message.
That is also shown by the references to bringing “the administration of justice into disrepute” and “the integrity of mortgage lending”.
After all, as the judge points out, a mortgage “is unquestionably the most practical means by which many home buyers are able to acquire their residences.”
TAKEAWAYS
- This does not mean that you should never sign a mortgage
- What it means is that:
- You should take the obligations seriously
- You should read it carefully
- You should make sure that you understand the consequences of default
- If you do not clearly understand the terms, get independent advice (that means do not rely on the lender to explain things)
- The best explanations come from lawyers
- If there is a default, the lender may enforce against any personal covenant or guarantee
- It is very difficult, but not always impossible, to successfully defend a collection lawsuit
- Your best bet in those situations is to try to negotiate a deal with the lender
- a lawyer can often help make the best possible deal
- Of course, no legal advice at the time of the signing is a substitute for your sound financial judgment in the first place.
- Financial advisors can be a great source of help, but ultimately, only you can determine how much risk you can afford to take.
- Despite the serious concern of courts about enforcing debts, there are exceptions, mainly where fraud or misrepresentation can be shown.
- Each individual situation depends upon its own facts.
- If you are served with a demand for payment, or worse, a lawsuit, seek legal help immediately.
- The sooner you see a lawyer, the sooner they can;
- assess the situation
- advise you
- assist you in dealing with the situation
- begin to preserve and collect the evidence that may help you.
- As we have explained previously, evidence is what wins cases
- Waiting increases the risk that helpful evidence may vanish
- Having any helpful evidence early improves your bargaining power with the lender
- What ever ese you do, do not just ignore the problem. It does not magically get better. Usually, it gets worse.
WHAT WEILERS LLP CAN DO TO HELP YOU
Our real estate and commercial lawyers continue or proud tradition of almost 80 years of advising and representing both borrowers and lenders in financial transactions of all sizes. We can:
- Help ensure that you understand your risks and obligations.
- Prepare or review documents to make sure that they match your understanding
- Give you advice and representation if issues arise
- Work with allied professionals such as accountants, financial advisors or credit counsellors, to help achieve the best possible outcome
Our litigation team woks seamlessly with our real estate and commercial lawyers when a lawsuit cannot be avoided.
Our objective is always the best, most cost-effective solution to any legal issue.
If you need advice or representation about a financing transaction, give us a call and see if we are the right lawyers for you.