Mortgage Arrears and Default: What Actually Happens

Missing a mortgage payment typically triggers contact from your lender fairly quickly — most lenders would strongly prefer to work out a solution (a temporary payment deferral, a repayment plan for the missed amount) than proceed toward default, since foreclosure or power of sale is costly and slow for them too.

If missed payments continue without resolution — commonly after a few months of arrears, though this varies by lender and province — the lender can begin formal default proceedings. In most Canadian provinces this is 'power of sale,' where the lender sells the property to recover the debt without going through the courts to take ownership first; a smaller number of provinces primarily use judicial foreclosure, a court-supervised process.

Costs incurred during this process — legal fees, property preservation and inspection costs, real estate commissions on the eventual sale — are typically added to what you owe, recovered from the sale proceeds before any remaining balance is returned to you.

If the sale doesn't cover the full amount owed (mortgage balance plus all the accumulated costs), you can still be pursued for the shortfall — called a deficiency — even after losing the home. Being behind on a mortgage does not automatically wipe the debt once the property is sold.

If you're genuinely at risk of missing a payment, contacting your lender proactively — before you're behind, not after — genuinely does open up more options than waiting. Lenders have far more flexibility to help early than once formal default proceedings are underway.