*This post was created in collaboration with Alpine Credits
You’ve finally made your last mortgage payment. Congratulations!
But now what? Are there any steps you need to take to make sure you’re no longer on the hook to pay your mortgage?
Yes, it’s called a ‘mortgage discharge’, and it’s a process that you, your lender, and your local land registry office will be involved in to take your lender’s name off your property’s title and remove you from any further financial obligations.
What Happens When You Pay Off Your Mortgage In Canada?
Once you’ve made your final mortgage payment and the loan is fully repaid, the lender’s lien on your property must be removed. To do this, your mortgage must be discharged.
Your lawyer can help you with this process, though you may also be able to do this on your own, depending on where you live in Canada. However, the mortgage documents may still need to be notarized.
Discharging your mortgage requires the involvement of your lender and the land title registry office in your province or territory. Once the mortgage discharge is complete, you will no longer be obligated to make any more mortgage payments.
Why Pay Off Your Mortgage Early In Canada?
One of the biggest benefits of paying off your mortgage early is the amount of home equity you’ll have. The more quickly you pay off your mortgage, the faster you’ll build your home equity. The higher your equity, the more you’ll be able to use it to access cash for any expense. Loans that are secured against your home equity often come with very low rates, making them valuable assets.
Even if you have bad credit, you can still qualify for a home equity loan or a home equity line of credit (HELOC) with certain lenders such as Alpine Credits. These lenders based their approval on your home equity, not your credit score or income.
What To Expect When You Discharge Your Mortgage
For the most part, a lawyer will be involved in handling the mortgage discharge process, which comes with legal fees. However, some provinces or territories may allow you to discharge your mortgage on your own without the assistance of a lawyer. However as mentioned, the documents may still need to be notarized by a notary or lawyer.
So what exactly happens when you pay off your mortgage in Canada?
During the mortgage discharge process, you can expect the following to happen:
- Your lender will provide written confirmation that your mortgage has been paid in full.
- Your land title registry office will take the necessary steps to move the property from your lender to you.
How Do You Remove The Lender’s Lien On Your Property Title?
As mentioned, your land title registry office will make changes to your property’s title once your mortgage is discharged. This will remove the lender’s rights to your property.
The process is different in every province or territory. For instance, if your home is located in Ontario, your lender will complete the mortgage discharge document, which must be witnessed, signed, and notarized by a real estate lawyer. You’ll need to provide your lawyer with a document from your lender proving that your mortgage is fully repaid.
How Much Does It Cost To Discharge Your Mortgage?
One of the things that happens when you pay off your mortgage in Canada is you have to pay fees. There are several fees involved in mortgage discharges, including the following:
Discharge Fees
Lenders charge a fee for discharging a mortgage. This fee ranges from lender to lender, with some lenders charging as much as a few hundred dollars, while other lenders waive this fee altogether. You will need to check your loan agreement to find out what the discharge fee is in your case.
Penalty Fees
If you pay off your mortgage early, you may be subject to early repayment penalty fees, which can be substantial depending on your exact situation. Again, you will need to review your mortgage contract to find out what the early prepayment penalty fee is, or if there is one at all.
Professional Fees
If you use the services of various professionals, such as a real estate lawyer or notary, you will have to pay for their services. These fees range depending on the people you hire and where you live, but you can expect to pay anywhere from a few hundred to a few thousand dollars.
When Can You Discharge A Mortgage?
There are a few instances in which a mortgage can be discharged:
When You Sell Your Home
If you decide to sell your house, you will need to get a mortgage discharge. Again, the discharge process will involve your lender, land registry office, and lawyer or notary. Once the mortgage has been discharged, the lender’s lien will be removed from the property’s title.
When You Pay Off Your Mortgage
You can discharge your mortgage when it is fully paid off, as long as there aren’t any other amounts owing on other related products, such as a home equity line of credit (HELOC).
When You Change Lenders
If you decide to switch lenders, whether you’re not happy with your current lender or because you can get a better deal elsewhere, the mortgage must first be discharged. In this case, the information on your property’s title must reflect your new lender.
How Do You Pay Off Your Mortgage Quickly?
There are a few strategies you can use to pay down your mortgage earlier:
Make Lump Sum Pre-Payments
Lenders often allow borrowers to make a lump sum payment toward the principal portion of their mortgages, in addition to the regular mortgage payments. Reducing your principal will not only help you pay your mortgage down faster, but it can save you a lot of money in interest.
Check with your lender or review your mortgage contract to find out if this is possible, how often you can make these additional payments, and what the lump sum payment limits are.
Increase Payment Frequency
Accelerating your mortgage payments is another way to reach the end of your mortgage term sooner. For instance, rather than make monthly payments, you can opt for accelerated bi-weekly or even weekly payments. Doing so will allow you to put more money toward your mortgage and save you on interest charges.
Refinance Your Mortgage
By refinancing your mortgage, you can pay your loan off faster by swapping your longer amortization period for a shorter one. The amortization period refers to the length of time required to fully repay your mortgage.
A longer amortization period comes with lower mortgage payments, but it will take you longer to repay your mortgage. Therefore, you’ll pay more in interest charges.
A shorter amortization period requires larger mortgage payments, but you will pay off your mortgage much faster.
For instance, if you still have 20 years left on your amortization period, you can refinance your mortgage to a 15 or 10-year mortgage instead. Plus, if you can qualify for a lower interest rate than what you’re currently paying, you can save a ton of money in interest charges over the life of your mortgage.
Final Thoughts On What Happens When You Pay Off Your Mortgage In Canada
Once you’ve paid off your mortgage, there’s a final process that takes place to remove the lender’s lien on the title. With a mortgage discharge, your mortgage will finally be considered complete and you’ll no longer be required to make payments.
