How a mortgage discharge works in Canada
Congratulations! You’ve paid off your mortgage and are about to discharge one of the biggest debts you’ll carry in your lifetime! But, how do you go about getting rid of that mortgage once and for all, and getting it officially off your record? You need to officially discharge it, and in Ontario, this is how you do it.
1. Make sure it’s paid off
You’ve made your last payment and you think that’s it – but is it? Contact your lender or your Toronto mortgage broker to confirm that it is. If it’s not, request a written letter that contains a balance needed to pay off the loan, a per diem, and an expiration date. Once the mortgage has definitely been paid off in full, request a letter from your mortgage lender saying so.
2. Obtain a discharge of mortgage document
The Discharge of Mortgage document is the official statement that you have paid off your mortgage and you want to discharge the loan entirely. You can find this document online, at your local Registry of Deeds office, or from a real estate attorney – but don’t fill it in. The document is not actually for you to fill in, and you need to be in the presence of a notarized real estate attorney before it’s completed.
3. Schedule a call/meeting
Those present need to be the original mortgage lender, yourself, and the real estate attorney. The lender is required to fill in the paperwork, while the real estate attorney must witness the process. After the paperwork is completed they can then sign and emboss it with their notary seal. It’s important that you bring to this meeting the letter from your lender stating that you have paid off your mortgage in full.
4. Pay the lender’s mortgage discharge fee
There is no set amount as to what this is, and it differs from lender to lender. Know what this is beforehand and make sure you bring the payment of the mortgage discharge fee with you to the meeting.
5. Make and distribute copies of Discharge Letter
Once your mortgage has been officially discharged, you will also be given a letter saying so. Make sure that you take several copies for your own records and that you take a copy to the Registry of Deeds office. There, an abstractor will put the mortgage discharge on record in the registry. This has its own additional fee, but it’s well worth to have that much more documentation that you have truly and officially paid off your mortgage!
Things to consider
You might be dreading your mortgage discharge fee payment—after all, you’ve already paid off your mortgage. But the good news is that you will have a chance to recoup some of these fees over time. Once your mortgage has been discharged, give your home insurer a call and ask if it can offer any mortgage-free discounts. In many cases, home insurers can offer savings of up to 20 percent to homeowners who don’t have a mortgage.
If you are feeling particularly excited about discharging your mortgage, you may want to pay off the remainder of your loan as it dwindles down. Unfortunately, penalties from lenders can blindside homeowners who choose this route. This penalty can vary greatly depending on your lender, but you can expect to pay a penalty that’s roughly equivalent to three months’ interest. This interest penalty is an interest rate differential (IRD), which means that you will be paying the high end of three months of interest if you don’t have a fixed rate.
Give yourself plenty of time to prepare for the fees associated with a mortgage discharge and avoid penalties by monitoring the balance on your mortgage closely over time. Thanks to online banking and financial applications, you can check on the balance of your mortgage loan quickly and conveniently, as often as you would like.
As your loan balance gets smaller, make sure you are saving some money to pay your discharge fees, which you can expect to be about $250 (CAD). Once you’ve paid your mortgage discharge fees, you can kiss your mortgage goodbye and say hello to some additional monthly funds! If you need help along the way, be sure to chat with your local Toronto mortgage professional to avoid some of the above noted pitfalls when discharging a mortgage.
