The equity of redemption is a foundational principle in mortgage law that protects the rights of borrowers i.e. the registered owners/mortgagors—by allowing them to retain ownership of the property upon repayment of their mortgage debt. When a borrower has defaulted, this right ensures that the borrower has an opportunity to redeem the property before the lender completes a foreclosure or power of sale process.

This equitable right exists separately from the mortgage agreement and serves as a critical safeguard preventing a lender from either selling the property under power of sale or obtaining registered ownership of a property by way of foreclosure because of payment default, provided that the borrower can satisfy the outstanding debt, including interest and costs.

Imagine a homeowner, Ms. Homeowner, who falls behind on her mortgage due to a loss of job. Her lender begins the power of sale process to recover the outstanding debt. Before the property is sold, Ms. Homeowner receives financial assistance from her son and pays the full amount owed to bring the mortgage back into good standing, including legal fees and accrued interest. By doing so, she exercises her right of redemption and retains ownership of her home—effectively halting the lender’s enforcement action.

Similarly, take the case of Mr. and Mrs. Couple, a retired couple who faced unexpected medical expenses that caused them to fall behind on their mortgage payments. Their lender issued a notice of sale, and the couple feared they would lose the home they had lived in for over 30 years. With the support of their extended family, they were able to gather the necessary funds and repay the full outstanding mortgage amount, including accrued interest and legal fees, just days before the scheduled sale by the lender. By exercising their right of redemption, Mr. and Mrs. Couple were able to stop the power of sale process and continue living in their home.

These scenarios emphasise the importance of the equity of redemption as a last line of defense against the loss of a home. It provides borrowers a second chance and ensures that mortgage enforcement remains fair and equitable.

It is pertinent to highlight that the mortgagor’s right of redemption must be exercised before the completion of the sale by the lender. The mere signing of an agreement of purchase and sale does not extinguish this right; rather, it continues to exist up until the actual closing of the transaction. Accordingly, agreements of purchase and sale under power of sale typically include a clause stating that the agreement is conditional upon there being no redemption made prior to closing by the registered owner, subsequent encumbrancer, or other party entitled to redeem the property.

Redemption requires the borrower to either bring the mortgage into good standing—by paying the arrears and associated enforcement costs—if the mortgage has not yet matured, or to pay off the entire balance owing under the mortgage, including enforcement costs, if the mortgage has become due. Courts are also cautious about any mortgage terms that attempt to limit or eliminate the right of redemption. Such clauses, known as "clogs on the equity of redemption," this means that no matter how the agreement is worded, the mortgagor must always retain the ability to redeem their property upon full repayment of the mortgage debt.

At Kormans LLP, we understand how stressful financial challenges can be, especially when your home is at stake. Our team is committed to guiding you through complex real estate and mortgage matters with clarity and care. Whether you need advice on your redemption rights or help navigating a potential foreclosure, we’re here to support you. Contact us at info@kormans.ca or call (905) 270-6660 to learn how we can assist.