Definition of Default
A default occurs when a homeowner stops making his or her mortgage payments and falls behind on paying back this debt.
If an owner defaults on a mortgage loan, the lender may seek legal action to possess and sell the property (also known as a foreclosure or judicial sale).
Why is this term important?
Defaulting on a mortgage loan may result in the mortgage holder taking legal action to possess the mortgaged property. In Canada, this process is known as a foreclosure or a judicial sale.
Unlike in the U.S., lenders who foreclose on a home cannot sell the home for less than fair market value.
Examples of term
If you stop making payments to your lender you will be in default of your mortgage contract. If this goes on long enough, your lender will seek court action to foreclose on your property. This will result in you losing ownership and usage rights of the property and allow the lender to sell the property at fair market value in order to recoup their outstanding debt.