What is a Discharge of Mortgage in Canada?

Everything you need to know from the steps involved to the cost of discharging a mortgage.

A discharge of mortgage is the process of releasing the lender’s legal claim on a property after the borrower has paid off the mortgage in full and has met all conditions. This process ensures that the lender no longer holds any rights to the property.

A mortgage is a loan secured by property, often a home. When you take out a mortgage, the lender registers an interest in your property. This means that the lender can take the property if you fail to comply with the mortgage agreement, which includes timely payments and property maintenance. Once the mortgage is fully paid, steps must be taken to remove the lender’s interest.

The Discharge Process

The discharge of a mortgage involves the borrower, the lender, and the provincial or territorial land title registry office. The process varies but generally requires a legal professional such as a lawyer, a notary, or a commissioner of oaths.

The borrower needs to initiate the discharge process. This involves making a request to the lender for mortgage discharge documentation. Additionally, the borrower may need to gather other required documents and submit them to the land title registry office.

Lenders typically provide confirmation that the mortgage has been paid in full. Most lenders will not send this confirmation automatically; the borrower must request it. It is important to check with the lender for specific procedures they might have for processing this request.

The land title registry office registers property titles and processes changes. The borrower, or a legal professional on their behalf, must submit all required documents. Once verified, the land registry office removes the lender’s rights to the property and updates the title to reflect the discharge.

Circumstances for Discharging a Mortgage

There are specific instances when you can discharge your mortgage.

1. After Mortgage Repayment
   Once you repay your mortgage in full, you, your lawyer, or your notary can initiate the discharge. Ensure that related financial products, like a home equity line of credit, are also paid off and closed before proceeding. This prevents complications in the discharge process.
   
2. Changing Lenders
   When you decide to switch to a different lender, the title of your property needs updating. The existing mortgage must be discharged, and the new lender’s information must be added. This process might involve additional fees, such as assignment fees. The new lender may offer to cover these discharge costs.
3. Selling the Property
   When selling a property, the mortgage must be discharged before title can be transferred to the new owner . This involves completing all steps dictated by the land title registry office. Once finished, the lender’s claim on the property is removed, allowing the sale to proceed smoothly.

Costs Involved in Mortgage Discharge

Discharging a mortgage often comes with several types of fees.

1. Mortgage Discharge Fees
   Your lender may charge a fee for processing the mortgage discharge. These fees can vary by province or territory, and in some cases, there may be regulations limiting the maximum amount a lender can charge. Generally, the fee ranges from no charge up to $400. Consult your mortgage contract for specifics.
2. Professional Fees
   Working with a legal professional to discharge your mortgage typically incurs additional costs. Lawyers, notaries, and commissioners of oaths may charge fees ranging between $400 and $2,500. The exact amount depends on the complexity of the process and the professional’s rates.
3. Penalty Fees
   Paying off your mortgage before the end of its term can sometimes result in penalty fees. These fees compensate the lender for the interest they would have earned had the mortgage reached the end of its term.
   Once the relevant documents are submitted and verified, the land title registry office updates the property title. It removes the lender’s rights and reflects the discharge. This finalizes the process and ensures that the property title is clear of the lender’s interest. The borrower should retain copies of all documentation for future reference.