September 29, 2026
What steps should you take if you miss a payment on your mortgage?
Getting legal help early is a good idea if you have payment problems. There are getting legal help early is a good idea if you have payment problems. complicated decisions which a lawyer can help you make.
We have written articles before about mortgages in general, and why you should take them seriously. They emphasized the importance of understanding what you sign. Understanding options is just as important when you miss a payment.
THE ISSUE
How you deal with a missed payment can make a major difference in how much it costs you to fix the problem.
If you are a few days late, you will be able to make a late payment with minimal cost- usually, simply a few days extra interest.
Wait longer than that, and penalties increase.
At this point, or even earlier, is when you should seek legal advice.
Beyond 35 days, problems escalate. The lender may go ahead and foreclose, or act on the power of sale under the mortgage or Mortgages Act.
Talking to a lawyer before that point is the best thing to do:
- The process is complex and technical, beyond what we can explain here
- the law is too confusing for most people to understand
- how the law applies to your particular situation can only be understood at that time, after careful consideration and discussion
- Trying to do it yourself to save cost is understandable, but may cost you more in the long run
WHAT IS THE DIFFERENCE BETWEEN FORECLOSURE AND POWER OF SALE?
Foreclosure is the right of the lender to take possession of the property and take title in their own name. If they do this, they may then sell or rent to property or use it themselves.
Instead of foreclosure, the lender may exercise their right of power of sale. The lender, after giving notice, may sell the property, usually on the open market, for whatever they can reasonably get as a sale price.
There are procedural differences, but the biggest differences, the ones that most affects the borrower, are:
- a foreclosure means that:
- The lender gets to keep the full value of the property
- BUT the lender cannot sue the borrower or guarantor for any balance due on the loan, or interest, penalties or expenses.
- under power of sale the borrowers and guarantors:
- remain responsible to pay any shortall after the sale.
- can be sued for the remaining balance of the amount borrowed, unpaid or even accelerated interest, penalties, and expenses of the lender
- Receives payment of any amounts received from the sale over the amount owing to the lender
If the lender elects to proceed by way of foreclosure, the borrower may have an opportunity to ask the court to convert the foreclosure into a sale. Doing that is good when there is value in the property beyond the redemption amount but puts other assets and income at risk.
If you receive a foreclosure or power of sale notice, you should immediately seek professional advice, from:
- those knowledgeable about the value of the property, such as a reactor or appraiser.
- financial advisors
- most importantly, in our view, a lawyer, to know and understand your rights.
WHY SEE A LAWYER BEFORE YOU GET TO THAT POINT
Default is defined by your mortgage. It likely starts the day that you miss a payment you are in default. The clock starts running on the lender’s remedies, and your rights. That means the clock is running on you making decisions.
Any forbearance (waiting for payment) or extensions granted do not necessarily extend time limits, unless the agreement specifically says so.
The good news is that section 17 of the Mortgages Act gives you a legal right to redeem the mortgage by paying the outstanding principal together with three months interest as a penalty. If it applies to your situation.
Section 18 gives additional rights, with different terms. You need to know which section you plan to take advantage of.
More good news is that section 22 of the Act gives you additional rights to put the mortgage into good standing upon payment of:
- the amount of the principal or interest with respect to which you are in in default, and
- the amount of any expenses necessarily incurred by the mortgagee.
Section 23 of the Act gives you even more different rights if an action has been started by the lender to enforce their rights.
Like all rights, these rights must be exercised in a timely fashion.
What you need a lawyer for is:
- to explain the differences between these rights
- which may apply to you
- the process to exercise them if you can;
- to help you with that process, and
- to help you deal with the consequences if you cannot redeem.
You need this advice as soon as possible after default, because the rights under each section of the Act are slightly different, fact specific, and can be confusing. If you wait, your options become limited and then may vanish entirely.
THE CASE
How confusing are the differences between the options?
One quick look at the Ontario Court of appeal decision in Redback Tours Inc. v. Canadian Equipment Finance & Leasing Inc. is all you need to know that the differences are complex.
The facts of the case are not unusual at all. A couple start a business. They obtain financing, in this case from a non-bank lender. But the law that applies is the same if it was a home, and a bank.
The lender exercised their right under the loan agreement to accelerate the loan and demanded immediate payment of the balance of interest and principal due under it, including unaccrued, future interest.
The issue was the application of section 17, the right to redeem mentioned above. More precisely, the issue was whether the borrowers had to pay the future interest .
The court found that, under the terms of their contract, they did have to pay these extra amounts and section 17 did not apply.
First, the Court says that the Mortgages Act does not apply to this situation because it involved a default during the term of the mortgage, rather than a failure to pay at the end of the mortgage. Section 17 only allows you to redeem upon payment of the full principal, not just the outstanding payments in default. Section 22 applies to the latter situation. Section 18 allows early redemption (payment in full). The timing, and the amounts payable, are different under each section.
Second, though, the Court says that even if the Mortgages Act did apply, the payment made by the borrowers was not enough to be the proper payment.
The Court further determined that certain disputed costs were included in the expenses recoverable under the agreement.
TAKEAWAYS
- your rights after a default under a mortgage are complex
- knowing which law applies is important
- how that law applies can vary greatly depending upon the facts of your situation
- a lawyer can help you:
- understand your options
- chose wisely between those options.
- follow the right process correctly
- deal with the lender
- if the matter goes to court
- the sooner you seek legal advice the better.
WHAT WEILERS LLP CAN DO TO HELP YOU
Our real estate and commercial lawyers continue our proud tradition of almost 80 years of advising and representing both borrowers and lenders in financial transactions of all sizes.
Our objective is always the best, most cost-effective solution to any legal issue.
It is always best if we can help you with preventative steps such as:
- helping you understand your risks and obligations.
- preparing or reviewing documents to make sure that they match your understanding
We also can help you if things go wrong. We can:
- give you advice and representation when 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.
If you need advice or representation about a mortgage or mortgage enforcement, give us a call and see if we are the right lawyers for you.