Discharging your Mortgage

For sellers the essential bargain in a real estate transaction is “I give you my house, free an clear, and you give me money”…

The “free and clear” part is key, it means that the Seller is giving the Buyer title free and clear of all financial encumbrances on title. A financial encumbrance includes things like your mortgage or a secured line of credit. When the mortgage is held by the bank the discharge is relatively straight forward: your lawyer requests a payout statement from the bank and on the closing date pays the money to the bank on their promise to discharge the mortgage.

When the mortgage is not held by the bank, things get a little more complicated. For example, if Uncle Buck loaned you 200k for your home and registered a mortgage, your lawyer would have to have a registered discharge “in hand” on closing and this creates a “catch-22” with the Buyer (who won’t part with the cash until he gets assurance of title). This problem is usually solved in British Columbia by the exchange of lawyers undertakings (court enforceable promises) with the lawyer holding all documents in “escrow” until everything is ready to go.

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