What are the Different Types of Foreclosures in Canada?

What are the Different Types of Foreclosures in Canada?
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Published By Jennifer Jewell

Question: What are the Different Types of Foreclosures in Canada?

Answer: There are two main types of foreclosures in Canada: judicial foreclosure, which involves court proceedings, and power of sale, where the lender sells the property without court involvement. Each province may have its own regulations and processes for these types of foreclosures.

What are the Different Types of Foreclosures in Canada? Exploring the Various Foreclosure Types

Real estate and homeownership often feel like an exciting journey, but sometimes challenges arise, and understanding those challenges is crucial. Among the most pressing concerns for homeowners is the concept of foreclosure. Across Canada, the nature and steps of the foreclosure process change depending on the province. So, let’s embark on this journey, unpacking and diving deeper into the types of foreclosures Canadians may encounter. [ 1 ]

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Judicial Sale: The Court-Supervised Process

In provinces like Ontario, the term "Judicial Sale" frequently surfaces. But what exactly does this mean for homeowners?

  • Starting the Process After a few missed mortgage payments, lenders jump into action. They take the first step by filing a lawsuit against the homeowner, signaling the start of the Judicial Sale process.
  • Receiving Court Orders If homeowners struggle to fend off the lawsuit or catch up on overdue payments, the court steps in. It then issues an order, paving the way for a property sale.
  • Auctioning the Property The property often goes under the hammer in a public auction. Once sold, the funds collected clear off the outstanding mortgage. And if there’s some money to spare, it goes straight back to the homeowner.

Though it might sound straightforward, navigating the Judicial Sale requires patience. Legal proceedings, court dates, and paperwork can stretch the process.

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Related Article: Can My Parents Sell Me Their House Below Market Value Canada?
Related Article: What Happens if You Default on Your Mortgage in Canada?

Power of Sale: Swift and Straightforward

Moving on, the Power of Sale stands apart from the Judicial Sale due to its speed. It sidesteps prolonged court interventions, ensuring a quicker resolution.

  • Issuing a Warning Lenders don’t wait around for too long. After a homeowner skips several payments, they swiftly send out a notice of sale, giving the homeowner a timeline to address the arrears.
  • Reclaiming the Property If the homeowner doesn’t respond in time or fails to pay up, the lender takes the reins. They gain control of the property and proceed with evictions, if necessary.
  • Listing the Property for Sale Then comes the selling phase. The lender puts the property on the market. Once it’s sold, the money goes towards settling the mortgage and other charges. If there’s any left, it’s handed back to the homeowner.

While the Power of Sale wraps up faster, there’s a catch. The speed sometimes means homeowners might pocket less surplus cash compared to a Judicial Sale.

Non-Recourse Loans: A Different Ball Game

Venturing into Alberta, we find a unique mortgage type: "non-recourse" loans. If a property with such a mortgage goes into foreclosure and its sale doesn’t settle the whole mortgage, the lender can’t chase down the homeowner for the rest.

The Redemption Period: A Chance to Bounce Back

Every dark cloud has a silver lining, and in the world of foreclosures, it’s the redemption period. This is the homeowner’s chance to put things right, either by clearing dues or tweaking the mortgage terms. But remember, the specifics of this period change with the province.

Addressing Deficiencies: What Happens Next?

Let’s paint a picture where a property sells, but the money doesn’t cover the entire mortgage. This gap, known as the deficiency, can become a lender’s focus. In certain provinces, lenders can secure a deficiency judgment, compelling the ex-homeowner to cover the shortfall.

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Wrapping It Up: Knowledge is Power

Foreclosure might cast a shadow on homeownership, but when you’re equipped with insights into its different types, you can face it head-on. By grasping the specifics of each process, homeowners can better strategize and potentially sidestep pitfalls. If foreclosure looms, remember: staying informed and seeking expert advice can light your path forward.


1. https://www.freedomcapital.com/types-of-foreclosure-in-canada/

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