What is a mortgage discharge fee?
Stop — What is a mortgage discharge fee and how it hits your sale in Georgetown
If you’re selling a home in Georgetown, Ontario, this one line item can surprise you at closing: the mortgage discharge fee. It’s small, it’s real, and if you ignore it you’ll be writing a cheque you didn’t budget for. Read this now and lock the closing numbers.
Quick answer: What is a mortgage discharge fee?
A mortgage discharge fee is a lender’s charge to remove its mortgage from the property title after you pay off the loan. The bank issues a discharge (release) document and the seller’s lawyer registers it at the land registry so the title is clear for transfer. It’s an administrative fee — plus legal registration costs — that shows up when the mortgage is paid out because you sold the house.
Why it matters when selling a house in Georgetown, Ontario
When you sell in Georgetown (Halton Hills), closing is a timing game. The lender must be paid off, the mortgage removed from title, and the buyer’s ownership recorded. If the discharge isn’t handled right, funds can be delayed, titles stay encumbered, and the sale stalls. You’ll also be responsible for the discharge fee and any payout penalties unless you negotiated otherwise.
Typical mortgage discharge fee — what to expect
- Lender administrative fee: usually $150–$350 CAD (some lenders charge more).
- Lawyer/notary registration fee: $150–$400 CAD depending on the firm and whether electronic registration (ELRS) is used.
- Early payout penalty: if you break a fixed-term mortgage or exceed your prepayment privileges, penalties can range from a few hundred to several months’ interest.
Bottom line: plan for $300–$1,500 total on most closings — more if there’s a penalty for breaking your mortgage.
The difference between a discharge fee and a mortgage penalty
- Discharge fee: administrative cost to remove the mortgage from title. It’s charged by the lender.
- Mortgage penalty (prepayment charge): charged if you pay out a mortgage before the end of its term in a way that violates your agreement. This can be far larger.
Both can apply when you sell.
Exact steps that happen at closing (and who pays what)
- Request a mortgage payout statement from your lender (good for a specific date). It lists the balance, per diem interest, discharge fee, and any penalty.
- Deliver payoff info to your lawyer/notary. They prepare the closing statement.
- Buyer’s funds arrive; seller’s mortgage is paid out from closing proceeds.
- Lawyer registers the discharge at the Ontario land registry (Teranet/ELRS). Fee is paid.
- Title is free of the mortgage; buyer takes possession.
Legally, the seller must ensure the mortgage is removed. Usually the seller pays the discharge fee and legal registration costs unless negotiated otherwise.
Local insight for Georgetown sellers (practical, Ontario-specific points)
- Ontario land registry: Ontario uses Teranet and increasingly ELRS (electronic registration). Electronic discharges are faster but registration fees remain.
- Timing: lenders and lawyers often ask for a payout statement 7–10 business days before closing. Some lenders require an exact closing date and may re-issue a statement if the date changes.
- Local law firms: Georgetown firms commonly charge flat closing packages. Ask for a written estimate that includes registration plus disbursements.
- Lender relationships: Many local sellers in Halton Hills find lenders will waive discharge fees if they keep another mortgage or portfolio product with the same bank. Ask.
- Municipal items: Property tax adjustments happen at closing. Taxes are prorated to the closing date — separate from the mortgage discharge.
Tax and financial considerations to watch right now
- Principal residence exemption: If the property is your principal residence, you won’t pay capital gains tax on the sale. Still declare the sale properly on your tax return.
- Secondary property: Capital gains tax applies if the home was not your principal residence — plan for taxes on the gain and consult an accountant.
- Mortgage interest and payout date: Mortgage interest accrues daily. If your closing is delayed, expect extra per diem interest on the payout figure.
- HST: Resale residential homes are generally exempt from HST. Mortgage discharge fees and legal fees are not subject to HST the same way goods are — ask your lawyer for specifics.
- No land-transfer tax for sellers: In Ontario, buyers pay the land transfer tax, not sellers. This isn’t related to discharge fees but is a common point of confusion.
How to avoid last-minute shocks (practical checklist)
- Ask your lender for a written payout statement at least 7–10 days before closing.
- Confirm the lender’s discharge fee and any early payout penalties in writing.
- Tell your listing agent and lawyer the payout details immediately. They handle registration and funds flow.
- If you have a portable mortgage, consider transferring it to your next property. That may avoid penalties or discharge fees.
- Budget an extra $500–$1,000 for unexpected legal disbursements and registration changes.
- If you’re downsizing or buying in Ontario, coordinate financing ahead to avoid forced early payout.
Negotiation levers — what you can ask for
- Request fee waiver: ask your lender to waive the discharge fee, especially if you’re staying with the same bank.
- Ask buyer to cover part of closing costs: in some markets you can negotiate the buyer to cover certain adjustments, but discharge fees are typically the seller’s responsibility.
- Portability: preserve your mortgage rate by porting instead of paying out.
Common mistakes sellers make (and how to avoid them)
- Waiting until closing day to request payout figures — result: delays and surprise fees.
- Assuming discharge equals penalty-free — some mortgages have significant early payout charges.
- Forgetting lawyer registration fees — lenders’ discharge fees are only part of the cost.
- Not confirming exact closing date — payout statements expire and must be reissued.
Real-world examples (simple scenarios)
- No penalty, small fee: Mortgage balance $250,000, discharge fee $200, law firm $250 = $450 total.
- Early-break penalty: Mortgage balance $300,000, penalty $3,000, discharge $200, law firm $300 = $3,500+.
- Portable mortgage: You port the mortgage to a new home and avoid discharge fees and penalties — cost savings depend on lender rules.
Closing pitch — get it done right
Don’t leave closing math to chance. A small administrative fee shouldn’t become a headline expense. Get your payout statement, confirm discharge and legal costs, and coordinate with your lawyer and realtor. The numbers are predictable if you do the work.
If you’re selling in Georgetown and want a local expert to walk you through the closing numbers and avoid last-minute surprises, contact Tony Sousa, Local Realtor.
Contact: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
FAQ — Mortgage discharge fees and selling in Georgetown, Ontario
Q: Who pays the mortgage discharge fee when I sell?
A: Typically the seller pays the lender’s discharge fee and the lawyer’s registration fee. Terms can change if negotiated in the sale agreement.
Q: How much is the mortgage discharge fee in Ontario?
A: Lender fees commonly run $150–$350. Legal/registration costs add $150–$400. Penalties for early payout can be much higher.
Q: Do I pay HST on a mortgage discharge fee?
A: Generally no HST on the discharge itself. Legal services may have different tax rules. Confirm with your lawyer.
Q: What’s a payout statement and how long is it valid?
A: A payout statement lists the exact amount to pay the lender on a specific date — principal, interest to date, discharge fee, and penalties. Validity varies; many lenders re-issue if the closing date changes.
Q: Can my lender waive the discharge fee?
A: Sometimes. Ask. Lenders may waive or reduce fees for long-standing customers or if you move products to the same bank.
Q: If I have a variable mortgage, do I still get charged a discharge fee?
A: Yes. The administrative discharge fee applies regardless of mortgage type. But variable-rate products may have lower or no penalty for payout compared to fixed-rate closed terms.
Q: What happens if the discharge isn’t registered before closing?
A: The buyer’s title could remain encumbered, which can delay or derail the sale. Good lawyers manage timing to avoid this.
Q: How should I budget for closing costs when selling?
A: Budget for discharge fee + legal registration ($300–$1,000), plus any mortgage penalty if applicable. Add tax advice if you owe capital gains.
Q: Are there Georgetown-specific steps I should know?
A: Request payout statements early, confirm lawyer’s registration process with local Halton Hills firms, and account for property tax proration. Electronic registrations are common and speed up discharge.
Need help running the numbers for your Georgetown sale or want a local walk-through of your mortgage payoff? Contact Tony Sousa — he’ll get you a clear estimate and coordinate with lawyers and lenders so you don’t get surprised at closing.
Contact: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
