Real Estate

How to Stop or Save Your Home From Foreclosure

How to Stop or Save Your Home From Foreclosure

Table of contents

    The fear of losing one’s home is a significant concern, especially in today’s high-interest rate environment. With the prospect of interest rates staying higher for longer, most homeowners, at some point in the next few years, will face an alarming increase in monthly payments at renewal. 

    Foreclosure can be a distressing experience. It’s important to know that there are steps you can take to prevent and even stop foreclosure and save your home. 

    In this article, we will explore the common reasons for home foreclosures, what strategies you can adopt now to avoid foreclosure, and, if you’re already facing this reality, strategies to help you save your home from foreclosure. 

    Key Takeaways

    • Foreclosure is a legal process initiated by mortgage lenders to recover their money when homeowners default on their mortgage payments.
    • The foreclosure process in Canada is typically completed as either a power of sale or judicial sale, depending on the province. 
    • Taking a proactive approach by contacting your lender to work out a plan and bring your mortgage back to good standing can help you avoid the foreclosure process.

    Best Mortgage Rates


    0.00%3 Year Fixed

    Get Rates

    0.00%5 Year Fixed

    Get Rates
    Check more rates

    What is a Foreclosure?

    Foreclosure is the legal process lenders initiate when a homeowner fails to make their mortgage payments. They do this by forcing the sale of the home being used as collateral against the loan. 

    In Canada, foreclosures are rare as the process is time-consuming and expensive for lenders. However rare, it does still occur and is a last resort for lenders after they have made other attempts to resolve the delinquency and failed. 

    Lenders will want to foreclose and recover their investment by taking possession of the property and selling it to recoup their losses. The timeframe this can occur after you default on your mortgage varies based on the province in which you reside. 

    Common Reasons for Home Foreclosures

    There are several common reasons a home might be foreclosed on in Canada. Financial hardships caused by job loss, a reduction in income, separation/divorce, or any other unforeseen expenses can all lead to the inability to meet your mortgage payment obligations. 

    Other factors include rising interest rates, high levels of debt, including mortgages, credit cards, and other loans, poor budgeting, financial management, or overspending can all contribute to defaulting on your mortgage payments. This could eventually lead to home foreclosure if more than multiple payments are missed.

    Higher mortgage interest rates: When interest rates rise, homeowners with adjustable (variable with fluctuating payments) mortgages may struggle to keep up with their monthly payments. Homeowners with fixed and variable (variable with fixed payments) mortgages could face a significant increase in their mortgage payments at renewal. No matter what type of mortgage you have, as the cost of borrowing increases, it can become challenging to manage your financial obligations associated with homeownership, especially if your budget is already tight. 

    Subprime mortgages: Some borrowers with lower credit scores may obtain subprime or private mortgages. These lending solutions often come with higher interest rates and less favourable terms to compensate the lender for the added risk of taking on a borrower with less-than-ideal finances. When faced with financial difficulties, subprime borrowers are at a higher risk of foreclosure due to the higher rates these lending solutions come with.

    Making too big of a commitment: Some homeowners make the mistake of taking on more debt than they can handle. Purchasing a home that stretches your financial capabilities too thin can lead to difficulties in making mortgage payments. Carefully consider your financial situation and ensure you can comfortably afford the mortgage payments before committing to a property.

    Economic downturn: During economic downturns, job losses and reduced income can make it difficult to make mortgage payments. Economic factors beyond your control, such as high inflation, recessions or industry-specific downturns, can increase your risk of foreclosure. The resulting financial strain may push you into foreclosure if you cannot find alternative sources of income or negotiate a solution with your lender.

    How to Avoid Foreclosure

    When faced with the possibility of foreclosure, there are several strategies you can pursue to avoid potentially losing your home. It’s crucial to take action as early as possible when exploring these options to find a solution that suits your financial situation. 


    Reinstatement involves bringing your mortgage payments up to date by paying the total amount owing, including any late fees and penalties. This option allows you to restore your mortgage to good standing and continue with regular payments. However, it may require a significant lump sum payment to stop the foreclosure process, allowing you to keep your home.


    A refinance involves breaking your existing mortgage and replacing it with a new one. You can do this to take advantage of lower interest rates or extend the amortization period to lower your payments. By refinancing, you can potentially lower your mortgage payments and make them more manageable.

    Mortgage Modification

    Mortgage modification involves negotiating with your lender to modify the terms of your existing mortgage. This can include converting a variable rate to fixed, extending the repayment period so monthly payments are reduced or adding it to the principal. Asking to modify your mortgage can help make payments more affordable and prevent foreclosure.

    Payment Capitalization

    More commonly known as mortgage deferral, this is a temporary arrangement with your lender that allows you to reduce or capitalize your mortgage payments for a specified period. This option is typically offered to homeowners facing short-term financial difficulties such as job loss. It provides temporary relief and allows homeowners to get back on their feet before resuming regular mortgage payments. 

    How to Save Your Home from Foreclosure

    If you find yourself in the midst of the foreclosure process, there is still time to take action and save your home. Here are some steps you can take to increase your chances of stopping foreclosure:

    Contact your lender: The first and most crucial step is to contact your lender as soon as possible. Explain your situation honestly and ask about available options. Lenders are often willing to work with borrowers to find a solution that allows them to keep their homes since foreclosure is an expensive and lengthy process that lenders will only use as a last resort.

    Seek professional assistance: In addition to contacting your lender, it’s beneficial to seek professional advice from a lawyer specializing in foreclosures. These legal professionals have expertise in foreclosure prevention and can provide guidance tailored to your specific situation. They can help you explore available options, negotiate with your lender, and develop a plan to save your home from foreclosure.

    Consider selling your home: If all else fails and it becomes clear that you will not be able to afford your mortgage payments going forward, selling your home may be the best option to avoid foreclosure. By selling the property, you can pay off the outstanding mortgage balance and potentially walk away with some equity.

    How the Foreclosure Process Works by Province

    The foreclosure process varies depending on the province in which you reside, and there are two ways homes are foreclosed in Canada. 

    If you reside in Nova Scotia, Quebec, Manitoba, Alberta, Saskatchewan, British Columbia, Yukon, Northwest Territories, or Nunavut, the foreclosure process is usually completed as a judicial sale. 

    If you reside in Prince Edward Island, New Brunswick, Newfoundland and Labrador, or Ontario, the foreclosure process is usually completed as a power of sale.  

    Here’s a brief overview of how foreclosure works in different provinces:

    Foreclosure in Ontario 

    Foreclosures in Ontario are typically done through the power of sale process. Power of sale allows the lender to sell the property to recover their money without involving the judicial system. Generally, a power of sale will be initiated if the homeowner is unable to pay the outstanding balance owed within the specified timeline in the default notice issued. 

    Once the property is sold, the proceeds of the sale are used to pay off the outstanding mortgage balance and any other associated costs. If the proceeds from the sale exceed these costs, the homeowner is entitled to receive the excess funds. If the proceeds are less than the outstanding costs, the lender may seek to recover the remaining balance from the homeowner. 

    Foreclosure in Quebec 

    In Quebec, the process is often a judicial foreclosure, meaning it involves a legal procedure through the court system, which can be lengthy. If a homeowner defaults on mortgage payments, the lender may initiate legal proceedings by filing a lawsuit. If the court decides in favour of the lender, they will allow the lender to take possession of the property. 

    Once the lender has legal possession, the court may oversee the sale of the property to recover the outstanding mortgage amount. Proceeds from the sale of the property are used to pay off the outstanding mortgage balance and any other legal fees and costs. 

    Foreclosure in British Columbia 

    In British Columbia, the process is often a judicial foreclosure, often referred to as a court-ordered sale. The court approves every step of the process up to and including the final decision on whether to accept an offer. If proceeds from the sale do not cover the lender in full, the lender can seek the difference from the borrower.

    Foreclosure in Alberta

    In Alberta, foreclosure is also a judicial process that requires court involvement. Lenders must obtain a court order to sell the property and recover their losses. Homeowners have the opportunity to respond and present their case in court. If a resolution cannot be made, the property will be sold in a judicial listing. 

    If there is no equity in the property or no offers, the court can grant an order to foreclose for the lender to take legal possession of the property. If proceeds from the sale do not cover the lender in full, they can seek the difference from the borrower. 

    Frequently Asked Questions on Foreclosures

    How long does foreclosure take?

    Foreclosure is a lengthy process that can take up to a year or more to complete. However, in provinces that allow power of sale, this process is much quicker to complete.

    How can I stop a foreclosure on my house?

    There are a few things you can do to stop foreclosure from happening. The most important step is to reach out to your lender and work with them to devise a solution that works for both parties. Some solutions you could explore are payment capitalization, payment deferral, or a refinance to make monthly payments more manageable. 

    If your mortgage is no longer manageable, selling your home could be a last resort to avoid the foreclosure process. 

    However, if your home is in disrepair, reaching out to a competent mortgage broker may assist you in a solution to resolve your current dilemma in bringing your mortgage into good standing while completing repairs to increase the potential selling value of your property. By controlling the sale of your property, you can negotiate a better price in the right market.

    When is it too late to stop a foreclosure on my house?

    If you can come up with the full amount of principal, interest, and any fees owed before the property is sold, you can stop the foreclosure process from taking place even if it’s already started. This means that you have the opportunity to stop foreclosure up to the time the property is sold. The exact steps for foreclosure vary between provinces and lenders.

    Final Thoughts

    Facing the prospect of foreclosure can be a stressful experience for any homeowner. There are options available if you’re struggling to make payments that will prevent foreclosure and help you save your home. Take proactive steps by contacting your lender before you miss too many payments so they can work with you toward a resolution. 

    While the fear of losing one’s home can be overwhelming, it’s important to stay proactive. By taking the necessary steps and seeking assistance from a knowledgeable and licensed mortgage expert, you can work towards a resolution.

    Ready to get started?

    In just a few clicks, you can see our current rates. Then apply for your mortgage online in minutes!

    Best Mortgage Rates


    0.00%3 Year Fixed

    Get Rates

    0.00%5 Year Fixed

    Get Rates
    Check more rates