How to Discharge a Mortgage in Alberta
If you're a homeowner in Alberta, you may be wondering how to discharge your mortgage.
Discharging a mortgage means that you're paying off the remaining balance of your mortgage and releasing the property from the mortgage lien.
It's important to keep in mind that discharging a mortgage can take time, so it's best to start the process as early as possible. You should also ensure that you have all the necessary documents and information before beginning the process to avoid any delays or complications.
If you're unsure about any aspect of discharging your mortgage, it's always a good idea to consult with your mortgage broker and realtor to ensure that everything is handled correctly. With the right preparation and support, discharging your mortgage can be a smooth and stress-free process.
What Is Discharging a Mortgage?
Discharging a mortgage means paying off the outstanding balance of your mortgage loan and removing the lender's security interest from your property's title.
Essentially, your mortgage lender will no longer have any claim to your property after a discharge.This process is also known as releasing a mortgage or discharging a lien.
When you take out a mortgage loan, the lender places a lien on your property as collateral for the loan. The lien gives the lender the legal right to foreclose on your property if you default on the loan. Once you pay off the loan, the lien is removed, and you own the property “free and clear.”
What Happens When You Discharge Your Mortgage?
The Lender's Role
Your lender will prepare a mortgage discharge form once you have paid off your mortgage in full. If everything looks correct, your lender will fill out the form and send it to the land title office. If your lender doesn't do this step for you, you must do it yourself.
The Land Title Office's Role
Once the land title office receives the mortgage discharge form, they will review it to ensure that everything is in order. If the form is approved, your home loan will be removed from the title of your property. You will receive a copy of the discharge form for your records.
It's important to note that the discharge process can take some time to complete. You should allow at least two weeks for the land title office to process your request. Alberta land titles processing times can be found on the top right corner of the Spin II Host website.
Once your mortgage has been discharged, you will have full ownership of your property, and you can use it as collateral for other loans, meaning a new lender can register a lien on title.
When Can You Discharge Your Mortgage?
As a homeowner in Alberta, there are several circumstances that may allow you to discharge your mortgage. Here are the three most common situations where you may be able to discharge your mortgage:
Discharging After Your Mortgage Is Paid Off
If you have paid off your mortgage in full, you may be able to discharge your mortgage. You will need to contact your lender to request a discharge statement, which will outline the amount owing on your mortgage, including any interest and fees.
Once you have paid the outstanding balance, your lender will provide you with a mortgage discharge document, which you can then register with the land registry office to remove the mortgage from your property title.
Discharging When Changing Lenders
If you are refinancing your mortgage or switching lenders, you may also need to discharge your current mortgage. In this case, your new lender will typically handle the discharge process on your behalf as it will happen as the simultaneously register the new mortgage lien.
Your new lender will request a discharge statement from your current lender and arrange for the discharge document to be registered with the land registry office.
Discharging When Selling
When you sell your property, you will need to discharge your mortgage to transfer clear title to the new owner. Your lawyer or notary will handle the discharge process on your behalf. They will request a discharge statement from your lender and arrange for the discharge document to be registered with the land registry office.
What Does Discharging a Mortgage Cost?
When you discharge a mortgage in Alberta, you may need to pay certain fees. Here are some of the costs associated with discharging a mortgage:
Discharge Fees
Your lender will charge you a discharge fee to cover the costs of processing the discharge. This fee can vary depending on the lender and the type of mortgage you have. It typically ranges from $100 to $400.
Legal Fees
You may also need to pay legal fees to have the discharge registered with the Land Titles Office. The legal fees can vary depending on the complexity of the discharge and the lawyer you choose. Typically, legal fees range from $500 to $1,500.
Other Costs
There may be other costs associated with discharging your mortgage, such as:
Mortgage prepayment penalties
Property appraisal fees
Title search fees
It's important to understand all of the costs involved in discharging your mortgage so you can budget accordingly. Make sure to ask your lender and lawyer about all of the fees and costs associated with discharging your mortgage.
Other Considerations Before Discharging
Home Equity Line of Credit (HELOC)
Even if you pay your home equity line of credit to zero, you might want to consider NOT discharging this mortgage. Having a Home Equity Line of Credit can be a great way to maintain access to the equity in your home. Many Canadians use HELOC’s for investments, renovations, managing monthly cashflow or purchasing other property.
Is Discharging Your Mortgage a Good Idea?
Discharging your mortgage can make sense in certain situations, but there are some specific circumstances to be aware of. In certain instances, fraudsters may target properties that are "free and clear" – those without any mortgage or collateral attached to them during the selling process. This might seem counterintuitive, as homeowners aim to own their homes outright. However, having a small home equity line of credit or a small mortgage balance can serve as a deterrent against real estate title fraud.
By having such financial commitments on your property, additional steps are required to discharge the mortgage. While it does not guarantee absolute prevention of fraud, it can act as a deterrent, making your property a less attractive target for potential fraudsters. It's essential to consider this preventive measure alongside other tips to safeguard your property.
If you’re thinking of discharging your mortgage, talk to the mortgage brokers at Spire Mortgage. They can guide you through discharging your mortgage and help you make the decision about whether or not it’s the right choice for you.
