What happens to my mortgage when I sell?
“What happens to my mortgage when I sell my home?” — You want the straight answer. Read this now if you’re a Georgetown ON home seller.
Quick, blunt answer
When you sell your home in Georgetown, ON, your mortgage does not magically disappear. The mortgage secured against your property must be discharged, paid out, or transferred. That happens at closing. Depending on your mortgage type, lender rules, and any liens or second charges on title, you will either:
- Pay the mortgage off from your sale proceeds, or
- Port or transfer the mortgage to a new property (if the lender allows), or
- Have a buyer assume it (rare and must be approved by the lender).
Everything else—prepayment penalties, legal discharge fees, and liens—affects how much you walk away with.
Why Georgetown ON home sellers must care about this now
If you’re selling in Georgetown, Ontario, this is not theoretical. Local buyers, lenders, and lawyers expect a clean title at closing. If you ignore how your mortgage and any liens impact the sale, you risk delays, unexpected costs, or even a deal collapse. Smart sellers plan ahead and protect their net proceeds.
Step-by-step: What happens to your mortgage when selling your home
1. Request a mortgage payoff statement
Contact your lender and request a payoff statement (also called a discharge statement). This document quotes the exact amount needed to fully clear your mortgage on the closing date. It shows principal, accrued interest, and any fees.
- Do this 2–3 weeks before closing. Payoff amounts change daily because interest accrues.
- Share the payoff with your lawyer or notary in Georgetown so they can prepare closing figures.
2. Check for prepayment penalties and how they’re calculated
Closed mortgages often carry penalties for breaking them early. In Canada, penalties commonly are:
- Three months’ interest, or
- An interest rate differential (IRD) calculation that compares your contract rate to today’s market rate.
Which applies depends on your contract. IRD can be costly on high-rate mortgages. Your lender must state the penalty method in your mortgage documents. Ask your broker or lawyer to explain the likely penalty in dollars.
3. Investigate all registered liens and charges on title
A mortgage is itself a charge, but other liens may be registered on your property in Georgetown, Ontario:
- Second mortgages or HELOCs
- Municipal tax arrears or property tax certificates
- Judgment liens from court orders
- Construction liens from unpaid contractors (Ontario Construction Act)
A title search (done by your lawyer) will reveal these. All registered liens must be dealt with at or before closing. Some can be paid from sale proceeds. Others must be resolved before transfer.
4. Closing: discharge and payout
At closing, your lawyer receives the buyer’s funds and pays off the mortgage using the lender’s payoff statement. The lender then issues a discharge of mortgage, which removes the charge from the title.
Costs to expect at closing:
- Mortgage payout amount (principal + interest + penalty)
- Legal or notary fees for discharge (there’s usually a registration fee)
- Realtor commissions and closing adjustments (property taxes, utilities)
Your lawyer will deliver the cleared title to the buyer’s lawyer.
Alternatives: Porting or assuming the mortgage
Porting your mortgage
Some Canadian mortgages are portable. That means you can transfer your existing mortgage rate and terms to a new property when you buy. Porting avoids penalties and preserves your rate—valuable if your current rate is lower than market.
- Porting must be approved by the lender and timed with your purchase.
- Lenders often require qualification for the new debt.
- If the loan amount for the new property is higher, you may need a blend-and-extend or a second mortgage.
Mortgage assumption
A buyer may assume your mortgage, but lenders rarely allow this without credit review. Assumption can be useful in a high-rate environment if your mortgage has a very favorable rate.
- The buyer must be credit-approved by the lender.
- The lender may require the original borrower (you) to remain liable unless released.
How liens affect the sale and your net proceeds
Any lien on title is a red flag to buyers and their lawyers. They must be cleared before title transfers.
- Municipal tax arrears: The municipality can place a lien which must be paid out from sale funds.
- Judgments: Court judgments are registered and reduce your available equity.
- Construction liens: In Ontario, these have strict timelines and can seriously delay closings. A lien can be removed only by payment or a court challenge.
If a buyer sees liens, they may demand title insurance or a holdback. Title insurance can smooth things, but it won’t remove the lien — only insure against certain title defects.
Net proceeds math: what you really get from the sale
Calculate ahead. Net proceeds = Sale price − (mortgage payoff + penalties + realtor fees + legal fees + closing adjustments + any lien payouts).
Example for Georgetown ON home sellers:
- Sale price: $750,000
- Mortgage balance: $450,000
- Prepayment penalty (estimate): $7,500
- Realtor fees (5%): $37,500
- Lawyer and closing: $2,000
- Property tax/prorations: $1,500
- Net: $750,000 − ($450,000 + 7,500 + 37,500 + 2,000 + 1,500) = $251,000
Plan with your lawyer and realtor to confirm exact numbers.
Local tips for Georgetown, Ontario sellers
- Use a local real estate lawyer or title company that knows Halton Region procedures and municipal tax processes.
- If your home has renovations, check for potential construction lien exposure. Ask contractors for releases or lien waivers before listing.
- If you owe municipal fees, clear them early. Georgetown buyers and their lenders expect a clean municipal tax certificate at closing.
- Speak with local mortgage brokers. They know which lenders in Ontario offer portable mortgages and who charges IRD vs three months’ interest.
Negotiation levers sellers often miss
- Time the payoff: If you control the closing date, you can minimize interest accrual and sometimes reduce penalties by syncing with lender rules.
- Offer to close sooner to avoid an extra month of mortgage interest and property taxes.
- If a lien surfaces late, a short-term holdback can be negotiated — but that requires careful drafting by your lawyer.
Avoid these common mistakes
- Waiting until the last minute to get a payoff statement.
- Assuming there are no hidden liens. Always order a title search.
- Not checking your mortgage contract for portability or penalty rules.
- Ignoring potential secondary charges like HELOCs or unsecured judgments.
Why sellers in Georgetown choose a local expert
Tony Sousa knows the Georgetown, ON market. He works with the local lenders, lawyers, and municipal offices. That local knowledge short-circuits problems: faster payoffs, faster discharge registrations, and fewer surprises at closing.
If you want help aligning your mortgage payoff, negotiating closing dates, or checking for liens, call Tony Sousa. He will coordinate the team and keep your closing clean.
Contact: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
FAQ — Mortgages, liens, and selling a home in Georgetown, ON
Q: Will my mortgage automatically transfer to the buyer?
A: No. Mortgages don’t automatically transfer. A buyer can assume a mortgage only with the lender’s approval. Most commonly the mortgage is paid out at closing using the sale proceeds.
Q: Can I avoid a prepayment penalty when I sell?
A: Sometimes. Options include porting the mortgage to a new property, paying off at maturity, or negotiating with your lender. Always check your mortgage agreement and speak to a broker.
Q: What happens if a construction lien appears just before closing?
A: This can delay or derail the sale. Your lawyer will review options: pay the lien from proceeds, negotiate a holdback, obtain a court order, or resolve the dispute. Prevention is best: get lien releases before listing.
Q: How long does it take to discharge a mortgage in Ontario?
A: Once the lender receives payment and the discharge instructions, the legal registration process typically completes in a few business days. Timing depends on the lender and the Land Registry Office workload.
Q: Do I need title insurance when selling?
A: Buyers often get title insurance; sellers don’t usually buy it. However, title insurance protects buyers and lenders against undiscovered title issues. Clearing liens is the seller’s responsibility.
Q: Who pays for mortgage discharge costs?
A: Usually the seller pays the lender’s discharge fee and the legal costs to register the discharge. These are deducted from sale proceeds at closing.
Q: How can I find out if my mortgage is portable?
A: Check your mortgage contract or ask your lender/mortgage broker. If portable, your lender will outline conditions and the process.
Q: What local penalties or taxes should Georgetown ON home sellers anticipate?
A: Expect municipal tax prorations, potential local improvement charges, and discharge registration fees. Your closing statement will list local adjustments.
Selling a home is a financial event. Handle your mortgage and any liens like a transaction, not a surprise. Prepare, get the right local team, and protect your proceeds. For Georgetown ON home sellers who want clear answers and fast solutions, call Tony Sousa at 416-477-2620 or email tony@sousasells.ca. He’ll walk you through the exact numbers and coordinate the payoff and discharge so you close on time and with confidence.
