Glossary
Default
Default means failing to meet your mortgage terms, most commonly by missing a scheduled payment, which can trigger lender enforcement..
A mortgage default happens when a borrower fails to meet the terms of their mortgage contract — most commonly by missing a scheduled payment, but also by breaching other obligations such as failing to pay property taxes or letting required home insurance lapse. A missed payment typically puts the mortgage into arrears; default is the broader failure to honour the agreement, and it can lead to enforcement against the home.
What counts as default
Every mortgage contract lists borrower obligations, and lenders can treat several kinds of breach as default:
- Missed payments — one or more instalments not received by the due date.
- Unpaid property taxes — many lenders collect taxes on your behalf or require proof they are current, because tax arrears can take priority over the mortgage.
- Lapsed insurance — most contracts require fire and liability coverage to be maintained.
- Unauthorized charges — adding another mortgage or encumbrance without the lender's consent can breach the terms.
What happens after a default
Lenders generally do not act instantly. A missed payment usually triggers a reminder, then a formal demand, and possibly fees. Continued non-payment can be reported to credit bureaus, which harms your credit score and makes future borrowing harder. Most lenders prefer to work out an arrangement before enforcement begins.
If the default is not cured, the lender can realize on its security. The route depends on provincial law: some provinces rely on power of sale, where the lender sells the property to recover what is owed, while others use court-supervised foreclosure. Either way, the borrower can lose the home and may still owe any shortfall remaining after the sale.
Mortgage default insurance, provided by CMHC, Sagen, or Canada Guaranty on high-ratio mortgages, protects the lender against loss on default. It does not shield the borrower from the consequences. Federally regulated lenders must also follow OSFI's Guideline B-20 when underwriting, which is why income, credit, and debt ratios are verified up front.
Preventing and resolving a default
The most effective step is early contact. Before a payment is missed, a lender may offer a short deferral or a temporary adjustment. Once in arrears, options can include a repayment plan, extending the amortization period to lower the payment, or, in serious cases, selling the home on your own terms to protect remaining equity.
A short list of practical steps: read your mortgage contract to see what triggers default, contact your lender as soon as a payment is at risk, keep records of every call and arrangement, and seek free help from a non-profit credit counsellor or your provincial consumer protection office. Our guide on what to do if you can't make a mortgage payment walks through the options.
Frequently asked questions
How many missed mortgage payments before you are in default?
Typically a single missed payment puts the account into arrears, and many lenders allow a short grace period before treating it as a formal default. The exact timeline is set out in your mortgage contract and by your lender's own policy, so confirm the specifics directly with your lender rather than assuming a standard number applies.
What happens if you default on a mortgage in Canada?
The lender can send a formal demand, charge fees, and report the missed payments to credit bureaus. If the default continues, enforcement follows provincial rules — power of sale in some provinces, court-supervised foreclosure in others. Mortgage default insurance protects the lender, not the borrower, and a shortfall after sale may still be owed.
Can a mortgage default be stopped or reversed?
Often it can, and acting early matters most. Contacting your lender before a payment is missed may open options such as a deferral, a repayment plan, or a longer amortization period. Some provinces impose timelines and notice requirements before enforcement. A non-profit credit counsellor or provincial consumer protection office can explain the options available to you.
Sources
Related terms
- Arrears — Arrears means mortgage payments that are past due — amounts the borrower should have paid by the scheduled due date but has not yet paid.
- Foreclosure — Foreclosure is the court-supervised process a lender uses to take possession of a home when a mortgage is not repaid.
- Power of Sale — A lender's contractual right to sell a defaulted property to recover an unpaid mortgage, used in some provinces instead of court-ordered foreclosure.
- Credit Score — A credit score is a number, typically from 300 to 900 in Canada, that summarizes your credit history for lenders considering your application.
- Mortgage Default Insurance — Insurance that protects the lender, not the borrower, when a high-ratio mortgage goes into default and the home sale does not repay the debt.