Personal Finance

Paying off mortgage steps

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  • Jul 18th, 2013 10:20 pm
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Deal Guru
Mar 20, 2003
10476 posts
656 upvotes
New-Brunswick

Paying off mortgage steps

Hi,

I'm looking to know what are all the steps to take when you are discharging your mortgage. I want to line up my ducks before I call the mortgage company to set up my closing date. Surprisingly, Google wasn't a great help- I either search using the wrong terms or the information isn't widely available.

The only absolutely necessary step I was able to glean from what little I found :
- Ensure the land registry office is sent a copy of the discharge

And the optional steps of :
- Advise insurance company (They told me last time we spoke to do so)
- Ensure my property taxes are paid as they go through the mortgage
- Open a secure line of credit against the property to prevent mortgage fraud

Is there anything else I should be looking at? I am expecting the discharge fee, any other fees I'm forgetting?

Thanks in advance
21 replies
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
You got pretty much all of it lined up. A few notes:

1 - Your lender may charge additional fees for "processing" the paperwork. This is on top of the discharge fee, and quite common.
2 - If you get a Heloc for the purpose of preventing others from registering a fraudulent charge on your property, make sure the lender registers the max amount possible, instead of the limit only. If the property is worth 500k and you ask for a 10k Heloc, some lenders will register a new charge of 10k while others will register 500k.

Mind sharing which province you are in? I ask because you may get some additional financial benefits in that situation, depending on your location.
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Deal Guru
Mar 20, 2003
10476 posts
656 upvotes
New-Brunswick
Thanks for the reply Laptop-tech, I an in New-Brunswick so am not sure if I'll get additional fees though I have no doubt the lender will charge me as much as they can. We are discharging with a lump sum, so we'll be paying the penalty for breaking the mortgage at the very minimum.*

That Heloc I assume is the line of credit- I'm not familiar on the process so I will need to read up on it. I was unaware up until a couple of months ago that people could register fraudulent mortgages on a random property and I don't want to have to go through that.

*And yes, I am aware that a number of folks will think paying off the mortgage is a stupid decision- but I'm in the camp of 'why have debt when you could live free'.
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
Yes - the Heloc is a Home Equity Line Of Credit. Essentially, depending on your current lender (if they offer Helocs and how they register the charges) you might be able to get the Heloc at no cost, or may have to pay some fees to remove the existing charge and get a new one in place. I suggest you check with your lender if they offer the product, as the procedure differs from lender to lender.

For the record - I think the idea of paying off the mortgage is awesome. I did it myself 2 years ago, and truly enjoy the fact I own my place and can give different uses to the improved cash flow. Kudos to you for achieving this.
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Deal Addict
Jul 11, 2010
1294 posts
329 upvotes
Toronto
Feneant wrote: Thanks for the reply Laptop-tech, I an in New-Brunswick so am not sure if I'll get additional fees though I have no doubt the lender will charge me as much as they can. We are discharging with a lump sum, so we'll be paying the penalty for breaking the mortgage at the very minimum.*

That Heloc I assume is the line of credit- I'm not familiar on the process so I will need to read up on it. I was unaware up until a couple of months ago that people could register fraudulent mortgages on a random property and I don't want to have to go through that.

*And yes, I am aware that a number of folks will think paying off the mortgage is a stupid decision- but I'm in the camp of 'why have debt when you could live free'.
There are cases where a fraudulent mortgage has been registered and usually involves 3 or 4 people are working together - ie a person from a land registry office, a mortgage agent and possibly a lawyer. They will find a property that is mortgage free and make an application for a mortgage for maybe 40% loan to value. The lender may not do an appraisal or just a drive by so the actual owners have no idea what is going on as there is no reason to talk to them. The loan is approved and the fraudsters keep the money. 2 or 3 months down the line the real owners start to get threatening notices from the lenders that they have missed their mortgage payments.
Doug Boswell
i
Jr. Member
Apr 26, 2010
129 posts
10 upvotes
Burnaby
Very useful information.

Just out of curiosity, who is responsible for sending a copy of the discharge to the land registry office? Lender or Borrower?
Jr. Member
Apr 26, 2010
129 posts
10 upvotes
Burnaby
dougboswell wrote: There are cases where a fraudulent mortgage has been registered and usually involves 3 or 4 people are working together - ie a person from a land registry office, a mortgage agent and possibly a lawyer. They will find a property that is mortgage free and make an application for a mortgage for maybe 40% loan to value. The lender may not do an appraisal or just a drive by so the actual owners have no idea what is going on as there is no reason to talk to them. The loan is approved and the fraudsters keep the money. 2 or 3 months down the line the real owners start to get threatening notices from the lenders that they have missed their mortgage payments.
How does one prevent this? Title Insurance?
Deal Addict
May 28, 2006
2389 posts
181 upvotes
they don't need the signature of the original owner in order to transfer land title or mortgage?
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
This is not that much common, but happens. Like Paul said, it normally requires more than just 1 person to get it done, but it happens. Signatures can be copied, and for mortgage purposes a lot of times docs can be signed online. At least in Ontario, someone still has to verify the identity of the applicant, which is often left to a lawyer if the representative has not met the client face to face.

Canuck - what some people do is register a Heloc on the property. It should not cost a dime to keep active, serves as an "emergency fund" if needed and because there is already a line (charge) against the property, the fraudster cannot ask for a huge amount as a second mortgage. For example, a property worth 500k without a mortgage. If you register a Heloc (max amount now is 65% of the property value if it is only a heloc, or 80% if you combine Heloc and mortgage) you could be "protecting" 325k, because if someone else wants to get another 100k against the house they wont be able to register another charge (lien) against it because the equity has already been "used up". These people normally try to get a second mortgage (or first if none are registered) but to avoid appraisals, etc they often ask for small amounts. So if the house is worth 500k and has no mortgage on it, it would be fairly easy to get approved for an 'equity loan" to "renovate the bsmt" around 100k. Lenders may not suspect too much, the risk of not getting the money back is low, the "client" still has 400k equity left, etc. With the right combination of people working on it, it can be done and has been done in the past. Most victims are seniors, who paid off their mortgage a long ago and are not so savvy or may not understand letter arriving at their address about a new loan.
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Moderator
May 28, 2012
12485 posts
5278 upvotes
Saskatoon
When we discharged our mortgage at the bank, they suggested setting up a HELOC. There would have been a cost to totally discharging the mortgage; we didn't have to pay anything by taking out the HELOC, plus the obvious security issues made it a no-brainer for us. The interest rate on our HELOC has sat at 3% for years, that's cheap money if you need it, although we've only ever tapped into it once and paid it off within a couple months.
Newbie
Feb 14, 2013
6 posts
1 upvote
Toronto
"So if the house is worth 500k and has no mortgage on it, it would be fairly easy to get approved for an 'equity loan" to "renovate the bsmt" around 100k. Lenders may not suspect too much"
Maybe its just me but a "Lender" that provides a mortgage to renovate a basement for 1. 100.000,00 and 2. Does not suspect too much must be a bit feeble minded? This whole possibility of getting a mortgage if one is not the owner is a total mystery to me. This issue is around for quite a while and nothing is being done to prevent this? There are security measure on everything but on a pretty important part of life and financial security this is still possible. Any lender that does not check out an application should be the one paying the loan. This is blatant negligence.
Deal Addict
Jul 11, 2010
1294 posts
329 upvotes
Toronto
apimom52 wrote: "So if the house is worth 500k and has no mortgage on it, it would be fairly easy to get approved for an 'equity loan" to "renovate the bsmt" around 100k. Lenders may not suspect too much"
Maybe its just me but a "Lender" that provides a mortgage to renovate a basement for 1. 100.000,00 and 2. Does not suspect too much must be a bit feeble minded? This whole possibility of getting a mortgage if one is not the owner is a total mystery to me. This issue is around for quite a while and nothing is being done to prevent this? There are security measure on everything but on a pretty important part of life and financial security this is still possible. Any lender that does not check out an application should be the one paying the loan. This is blatant negligence.
The problem is when 2 or 3 are working together to do a fraudulent mortgage. A mortgage agent has to verify identity. As mentioned above it may be a long distance application and the agent does not see them in person. The lawyer must also verify ID as he/she will see them in person. ID can be fraudulent and if the lawyer is part of the scheme the lender believes that the applicant has been verified twice. The lender will also call the employer but that could be set up also to be part of the scheme.
Doug Boswell
i
Newbie
Apr 3, 2006
52 posts
1 upvote
Toronto
Hello Peneant,
I am in same situation as you, and I also live in NB.
My mortgage is with Scotia Bank under STEP. (Scotia Total Equity Plan).
Here is the reply I got from bank:
"As long as the STEP remains, the bank still holds a charge on your property, and that is why there is no discharge, or fee, if the STEP stays open. If at any time you sell your property, or decide to payout and close the STEP, then there will be a one time charge of $275 for the preparation and execution of discharge documents."

I just wonder, if the bank still hold charge on property, will land registry office send me any document for discharge? My guess will be NO, correct?
Second, what is the effect on home insurance whether bank have hold on the property?

HELOC is not important for me, any suggestion should I pay out and lower the insurance (if possible?)

Thanks.
Deal Addict
Nov 12, 2008
1983 posts
389 upvotes
Aurora
This is a direct copy/paste of someone's post on another site. Is it true?

Something to be aware of as I found out the hard way when I went to lease a vehicle with an R1 credit rating and was declined. Most banks, including mine (RBC), report the balance of the Line of Credit portion of your mortgage to Equifax and Transunion, which hammers your credit score and limits your access to credit outside your mortgage. Even with an R1 credit rating, lenders will get very nervous when they see that you have a large line of credit on your credit bureau report. This is based on my own personal experience. Make sure you don’t need access to other forms of credit if you have a large balance on the LOC portion of your mortgage. It will be very hard to obtain other credit.
Deal Addict
Nov 11, 2004
3503 posts
615 upvotes
Ottawa
Feneant wrote:
And the optional steps of :
- Advise insurance company (They told me last time we spoke to do so)

How does this effect the insurance? Does the price increase / decrease
Hello
Sr. Member
User avatar
Dec 6, 2010
500 posts
214 upvotes
dougboswell wrote: There are cases where a fraudulent mortgage has been registered and usually involves 3 or 4 people are working together - ie a person from a land registry office, a mortgage agent and possibly a lawyer. They will find a property that is mortgage free and make an application for a mortgage for maybe 40% loan to value. The lender may not do an appraisal or just a drive by so the actual owners have no idea what is going on as there is no reason to talk to them. The loan is approved and the fraudsters keep the money. 2 or 3 months down the line the real owners start to get threatening notices from the lenders that they have missed their mortgage payments.
Does the law prevent you from this kind of fraud????
Deal Addict
Mar 30, 2009
1513 posts
1214 upvotes
I'm not sure why you want to discharge the mortgage even if you don't want to open a HELOC. Why pay the fee? I know people who have paid off their mortgage and never bothered with the discharge just to avoid paying the fee.

Notifying the insurance company that you've paid off your mortgage will get you a small discount on your home insurance. It's not a big discount, but it's nice.
Deal Addict
Nov 12, 2008
1983 posts
389 upvotes
Aurora
frugal1 wrote: I'm not sure why you want to discharge the mortgage even if you don't want to open a HELOC. Why pay the fee? I know people who have paid off their mortgage and never bothered with the discharge just to avoid paying the fee.

Notifying the insurance company that you've paid off your mortgage will get you a small discount on your home insurance. It's not a big discount, but it's nice.
I'm curious about this too, but there must be some benefits to having the title in your name. Also, I may be wrong but won't you eventually have to discharge it if/when you sell the house? Pay now or later type deal?
Deal Addict
Mar 30, 2009
1513 posts
1214 upvotes
You have to discharge it if you sell. However, there's no rush to pay the fee and get a discharge if you don't have to. Why pay for something if you don't have to get it?
Sr. Member
Oct 16, 2007
837 posts
51 upvotes
Does the discharge fee increase with time? If it is, then it is better to pay early.??

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