Foreclosure vs Power of Sale in Ontario: How to Tell Which One You Are Facing
Quick answer
- Foreclosure and power of sale are two different mortgage enforcement remedies in Ontario, and they are not interchangeable.
- In a power of sale, the lender sells the property without taking ownership of it: the borrower stays on title until the sale closes, and any surplus after the debt and the costs is typically paid to the borrower.
- In a foreclosure, the lender asks the Superior Court of Justice for title, meaning legal ownership of the home, under Rule 64 of the Rules of Civil Procedure; where a final order is granted, any remaining equity goes with the title.
- Power of sale is the standard route in Ontario, and foreclosure is used far less often, though it remains available.
- Most Ontario homeowners who think they are in foreclosure have received a Notice of Sale, which begins a power of sale rather than a court action.
The envelope usually arrives from a law firm you have never heard of. Inside is a document with a formal title, an amount, and a date on it. Foreclosure is the first word most people reach for to describe what is happening.
In Ontario, that is usually the wrong word. Foreclosure and power of sale are two different ways a lender can enforce a mortgage, and they lead to different places. The route most Ontario homeowners actually encounter is power of sale, which in the ordinary case involves no court at all.
This is not a matter of terminology. The difference decides who owns the home while the process runs, what happens to any money left once the debt is paid, and what you may be able to do next. What follows sets the two remedies side by side. For the notice periods and the stage-by-stage mechanics of the power of sale route, see our guide to how power of sale works in Ontario.
Quick Start: Where You Are Right Now
Readers arrive at this page from different positions. Find the description that matches what has actually reached you.
Behind on payments, nothing from a lawyer yet
Nothing formal has started, and your options are widest here. Start with what to consider if you have fallen behind but nothing has arrived yet.
A Notice of Sale has arrived
That document belongs to the power of sale route, not foreclosure. Read the comparison below, then the section on your equity.
You have been served with a statement of claim
This is a court document, which points to the court route. Start with what to do when you are served with a statement of claim, then read the roadmap section below.
The property is listed or already sold
The questions that matter now are about money rather than about the house, so go to the section on equity.
Foreclosure and Power of Sale Are Not the Same Remedy
Power of sale comes from the mortgage itself and from the Mortgages Act, R.S.O. 1990, c. M.40. In Ontario, power of sale is a lender's right to sell a mortgaged property after the borrower defaults, generally without a court order, with the borrower remaining the registered owner until the sale closes. More than one set of notice periods can apply, and our guide covers the notice periods under the Mortgages Act.
Foreclosure is a court proceeding. In Ontario, foreclosure is an action under Rule 64 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, in which a lender asks the Superior Court of Justice to end the borrower's equity of redemption, meaning the right to pay off the mortgage and keep the property, and to transfer title to the lender.
A third route exists. In a judicial sale, the property is sold under the court's supervision, and the lender never owns it. Judicial sale also falls under Rule 64 and, like foreclosure, is used far less often here than power of sale.
Lenders typically choose power of sale because it is faster, less costly, and keeps them out of the chain of title. Cost matters in a way that is easy to miss: a lender taking title through a final order of foreclosure may face land transfer tax on that transfer, which does not arise on a power of sale.
How the Two Remedies Compare
The clearest way to see the difference is to follow the title, then follow the money. In a power of sale, you remain the registered owner throughout, and title moves once, directly to the buyer, at closing. In a foreclosure, title may move to the lender by court order, and your interest in the property ends there.
Money follows title. That fact explains most of what separates the two routes, including where any equity ends up, meaning the value of the property above what is owed against it.
| Power of sale | Foreclosure | Judicial sale | |
|---|---|---|---|
| Who holds title while the process runs | The borrower, throughout | The borrower, until a final order is granted | The borrower, until the court-approved sale closes |
| When title changes hands | Once, directly to the buyer, at closing | To the lender, by final order of foreclosure | Once, to the buyer, when the court-approved sale closes |
| Is a court order ordinarily required | No. Exercised under the mortgage and the Mortgages Act | Yes. An action under Rule 64 in the Superior Court of Justice | Yes. Also an action under Rule 64 |
| What happens to money left after the debt and the costs | Any surplus is typically paid out, beginning with the borrower | Any remaining equity goes with the title | Any surplus is typically paid out, beginning with the borrower |
| May the lender pursue a shortfall afterwards | The lender may pursue the borrower, and any guarantor, for a deficiency | Not typically. A lender that has taken title is generally treated as having taken the property in satisfaction of the debt | As with a power of sale, the lender may pursue a deficiency |
| How often the route is used in Ontario | The standard route | Used far less often, though it remains available | Used far less often, though it remains available |
How to Tell Which Process You Are In
Two things separate the documents. The first is where the paper comes from: a court document carries a court file number and the name of the Superior Court of Justice, while a Notice of Sale comes from the lender's side and carries neither. The second is what it asks of you. A Notice of Sale states an amount and a date. A statement of claim starts a lawsuit in which you are a named party, with a period set by the Rules of Civil Procedure for delivering a defence.
If you are unsure which you are holding, a mortgage litigation lawyer can read the documents and tell you which route the lender has taken. Getting legal guidance is worth doing early rather than after a date has passed.
| Document | Where it comes from | What it typically points to |
|---|---|---|
| Demand letter | The lender's lawyer. Not a court | Default. Either route may follow |
| Notice of Sale Under Mortgage | The lender or its lawyer. Not a court, and it carries no court file number | Power of sale |
| Statement of claim naming the mortgage | Issued by the Superior Court of Justice. It carries a court file number | Foreclosure or judicial sale |
| Judgment or order referring to the equity of redemption | The court | A foreclosure or judicial sale action already under way |
| Final order of foreclosure | The court | Foreclosure, at the stage where title may transfer to the lender |
| Writ of possession | The court | Enforcement of possession, which may follow either route |
How a Foreclosure Action Unfolds in Ontario
The sequence below is typical. Individual files move faster or slower depending on the mortgage, the lender, the court, and what the borrower does at each stage.
Matters of this kind sit with Nihang Law's civil and commercial litigation team.
What Happens to Your Equity in Each Route
If the sale clears the debt
Following a power of sale, money left after the expenses of the sale, the mortgage debt, and other registered claims is the surplus, and it is typically paid to those entitled to it, beginning with the borrower. Asking the lender for a full accounting is reasonable, and questions about the figures are easier to raise before funds are distributed. Our guide covers what happens to any surplus in more detail.
If the sale does not clear the debt
A shortfall is called a deficiency. After a power of sale, the lender may pursue the borrower, and any guarantor, for it. The position after a completed foreclosure differs, because a lender that has taken title is generally treated as having taken the property in satisfaction of the debt, so a deficiency claim is not typically open to it afterwards. Which applies depends on the route taken and how far it went. It is a question to ask a lawyer rather than assume.
What You May Be Able to Do Inside a Foreclosure Action
Asking to redeem obliges the lender to account for what it says is owed, which can be useful in itself, because the amount claimed is not always the amount that holds. Redemption may remain possible well into the action, though timing is the constraint and the amount required generally goes beyond the arrears alone.
If you are a defendant in a foreclosure action, you also have obligations, including responding within the time the Rules allow. Advice about defending a mortgage enforcement claim is more useful early in the action than late in it.
Mistakes That Come From Confusing Foreclosure and Power of Sale
- Waiting for a court date that is not coming. A Notice of Sale does not schedule a hearing, and treating it as the start of a lawsuit can waste the notice period entirely.
- Treating a statement of claim as another collection letter. It is the opposite: a court document with a response period already running.
- Assuming United States timelines and procedures apply in Ontario. United States foreclosure procedure differs from Ontario's, and the deadlines described there do not apply here.
- Believing a power of sale becomes a foreclosure when the notice period ends. They are separate routes, chosen at the outset.
- Assuming equity is treated the same way in foreclosure and power of sale. It is not, and that difference is the reason the distinction matters.
- Assuming a shortfall works the same way in foreclosure and power of sale. The position after a power of sale and the position after a completed foreclosure differ, so the answer depends on which route the lender took.
Questions like these often sit alongside other property matters, which Nihang Law's real estate law services team also handles.
Questions People Ask About Foreclosure in Ontario
Is foreclosure the same as power of sale in Ontario?
The bank sent me a Notice of Sale. Does that mean I am being foreclosed on?
Do I get any money back if the bank sells my house?
Can the bank come after me for the difference if the house sells for less than I owe?
Why do Ontario lenders usually choose power of sale instead of foreclosure?
Does foreclosure still happen in Ontario?
I was served with a statement of claim about my mortgage, what is that?
Can I stop a foreclosure once it has started?
What to Do Next
The two routes carry different consequences for your title, your equity, and any shortfall, and which one you are in is usually identifiable from the document you were sent. You remain the owner of your home until either a sale closes or a court order changes that.
Before speaking to anyone, gather the notice or claim you received, your mortgage or charge document, your most recent mortgage statement, and any correspondence from the lender's lawyer. Qasim Ali, Principal Lawyer at Nihang Law, works with homeowners across Toronto, Scarborough, and the wider GTA on mortgage enforcement matters.
Talk it through with someone who reads these documents every week
Nihang Law is a full-service Ontario firm, so a mortgage enforcement file that also touches your real estate, private lending, or litigation position can be handled under one roof.
Contact Nihang Law
About the author
Qasim Ali
Principal Lawyer · Nihang Law Professional Corporation · Toronto & Scarborough, Ontario · Law Society of Ontario
Principal Lawyer at Nihang Law Professional Corporation, serving clients across Toronto, Scarborough, and the broader Greater Toronto Area. He provides full-service legal representation across immigration, real estate, family law, criminal law, civil litigation, employment law, wills and estates, and business law.
Nihang Law is particularly recognized for its depth in immigration and real estate law, a combination that serves newcomers and growing families navigating both legal systems at once.
Learn more about Qasim Ali →Sources and References
- Mortgages Act, R.S.O. 1990, c. M.40 — Government of Ontario, e-Laws. ontario.ca/laws/statute/90m40
- Power of sale and assignments — Government of Ontario. ontario.ca/page/power-sale-assignments
- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 64 (Mortgage Actions) — Government of Ontario, e-Laws. ontario.ca/laws/regulation/900194
- Rules of Civil Procedure forms register, Forms 64C and 64E — Ontario Court Services. ontariocourtforms.on.ca
- Rule 64 — Mortgage Actions, 2nd ed, 2022 CanLIIDocs 1053 — CanLII. canlii.org
- Land transfer tax: final orders of foreclosure and quitclaims in lieu of foreclosure — Government of Ontario. ontario.ca
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