The Difference Between Power of Sale and Foreclosure in Ontario

The single most important difference between power of sale and foreclosure in Ontario comes down to ownership. In a foreclosure, the lender takes ownership of the property — the homeowner loses all rights to the property and to any equity in it. In a power of sale, the lender does not take ownership. Instead, they sell the property on the homeowner's behalf and recover what they're owed from the proceeds. Any surplus after the debt is paid belongs to the homeowner.

This is not a minor distinction. In a foreclosure, you lose everything. In a power of sale, you retain equity rights until the sale is complete — and that equity can potentially be recovered through a private sale before the lender's process is finished.

Power of sale is by far the more common process in Ontario. This is because virtually all Ontario mortgage contracts include a power of sale clause — a provision that gives the lender the contractual right to sell the mortgaged property without going to court if the borrower defaults. It is faster, less expensive for the lender, and does not require judicial involvement.

Foreclosure, by contrast, requires a court order and is a significantly longer and more expensive process. Lenders in Ontario almost never pursue foreclosure when they have the option of power of sale, which is nearly always. If you have received any legal notice related to a mortgage default in Ontario, it is almost certainly related to power of sale, not foreclosure.

Power of Sale: The lender sends a demand letter, then issues a Notice of Sale. There is a redemption period — typically 35 days for residential properties — during which you can pay out the arrears and stop the process. If you don't redeem, the lender lists and sells the property. No court order is required. The process can move within weeks after the notice period expires.

Foreclosure: The lender files a statement of claim in court. There are multiple court appearances, notice requirements, and a much longer process — often many months to over a year. The court issues an order vesting ownership of the property in the lender. The homeowner's equity is extinguished. The lender owns the property and can then sell it at whatever price they choose, with no obligation to share proceeds with the former owner.

Power of Sale: You retain equity rights throughout the process. If the lender's sale generates more than the total amount owing, the surplus belongs to you. If you sell privately before the lender completes the process, you control the sale and the equity recovery.

Foreclosure: Once the foreclosure order is granted, you lose all equity rights. The property belongs to the lender. There is no surplus entitlement.

Power of Sale: Right to redeem (pay out the debt at any point before the sale completes). Right to sell privately. Right to any surplus proceeds. Right to proper legal notice at each step.

Foreclosure: Right to contest the claim in court. Limited redemption rights. No right to surplus proceeds after the foreclosure order is granted.

Foreclosure is universally worse for the homeowner. You lose all equity, the process can take longer (increasing carrying costs and stress), and you have fewer rights at the end of it. The only scenario where foreclosure might be considered is if your property is significantly underwater (you owe more than it's worth) — in that case, foreclosure extinguishes the debt along with the equity, and you may not face a deficiency judgment. But even in that scenario, the advice of a lawyer is essential.

For the vast majority of Ontario homeowners facing mortgage default, the situation is power of sale — and in a power of sale situation, you have meaningful options and rights that are worth exercising.