Can I pay off my mortgage early before closing?
Can you wipe out your mortgage before closing and keep the full sale proceeds? Here’s the truth Milton sellers need now.
Why this matters if you’re selling in Milton, ON
Selling a house in Milton, Ontario is about one thing: cash to the closing table that actually clears title. If your goal is to pay off your mortgage early before closing, you can — but only with the right plan. Do it wrong and you lose money, slow the sale, or leave a lien on the title that hurts the buyer and sinks the deal.
This post explains, in plain language, how early mortgage payoff works in Milton, what costs to expect, and exactly what to tell your lender, lawyer, and listing agent. Use this as your checklist so your sale closes clean and fast.
Short answer: Yes — but with conditions
You can pay off your mortgage before closing. The lender will issue a mortgage payout statement showing the exact amount due, including any prepayment penalty and interest up to the payoff date. Once the lender is paid, they prepare a discharge of mortgage. The discharge must be registered at the Ontario land registry to clear title.
For most Milton sellers the practical choice is: have your closing lawyer pay the mortgage from sale proceeds at closing. But sometimes paying early makes sense — for example, to remove a HELOC or second mortgage before marketing, or to avoid a buyer worrying about an active lien.
Key terms you must know (quick)
- Mortgage payout statement: The lender’s official amount to be paid to clear the mortgage by a specific date. Usually valid 30 days.
- Prepayment penalty: Fee for breaking a closed mortgage early. For fixed closed mortgages it’s typically the greater of 3 months’ interest or the Interest Rate Differential (IRD). For variable rate mortgages it’s usually 3 months’ interest.
- Discharge (or Release) of Mortgage: The document the lender registers to remove their charge on your property.
- Title search / Certificate of Pending Litigation (CPL): Search that reveals other liens or judgments against the property.
Common obstacles for Milton sellers
- Prepayment penalties that are bigger than you expect. Banks calculate IRD differently. Ask your lender for a written calculation.
- Second mortgages, HELOCs or lines of credit that must be paid separately. Each lien needs its own discharge.
- Timing and registration: the discharge must be registered with the Ontario Land Registry (Teranet system). A delayed discharge delays closing.
- Lawyer coordination: buyer’s lawyer needs proof of discharge to remove conditions and release funds.
Typical costs you’ll face in Milton
- Prepayment penalty: Varies wildly. Could be small (three months’ interest) or thousands if IRD applies. Ask for a firm written payout calculation.
- Lender discharge fee: $100–$350 typical.
- Lawyer/registration fees: $150–$500 for handling payout and registration with the land registry.
- Title search fees and any outstanding local tax or utility liens.
Exact amounts depend on the lender, mortgage type, and remaining balance. Always get the written payout statement.
Step-by-step: How to pay off your mortgage before closing (Milton sellers)
- Request a written mortgage payout statement from your lender as soon as you list the property.
- Ask the lender to include: payoff amount, expiry date of the statement, prepayment penalty breakdown, and discharge fee.
- Share the payout statement with your real estate lawyer in Milton.
- Decide whether to pay before closing or let the closing lawyer pay from sale proceeds at closing. Consider penalties, timing, and whether you need the lien removed before marketing.
- If paying early, instruct your lawyer to verify payment method (certified funds, bank transfer) and to confirm receipt with the lender.
- Confirm the lender will register the discharge at the Ontario land registry or provide the discharge for your lawyer to register.
- Obtain proof of registration. Your lawyer should confirm the title is clear before closing.
- Adjust Statement of Adjustments at closing to reflect the mortgage payoff and any penalties or fees.
- Keep records: payout statement, discharge registration receipt, and final statement of adjustments.
Practical Milton tips: make the sale less risky
- Use your lawyer: Milton real estate lawyers know local Land Registry quirks. They can register discharges faster and confirm a clean title.
- Order a pre-sale title search: Find unknown liens before the buyer does.
- Time the payout statement: Payout statements often expire in 30 days. Align statement validity with your closing date.
- Coordinate with the buyer’s lawyer: They expect confirmation that all mortgages and liens will be discharged at closing.
When paying early makes sense
- You have a second mortgage or HELOC that scares buyers.
- You plan to close weeks earlier than the payout date or want to lock a payoff figure now.
- You want to remove the mortgage from the property registry before offers arrive to make your listing cleaner.
If none of those apply, the simplest path for most Milton sellers is to let the closing lawyer handle payout from the proceeds of sale.
When paying early is a bad idea
- Your mortgage has a large IRD penalty. Paying early can cost more than the interest you’d have paid for the remaining term.
- Doing it disrupts funds needed for your next purchase. Don’t clear the mortgage unless you have the cash or funding lined up.
- You risk timing problems: if discharge registration is delayed, the buyer’s lender may not fund and the deal can collapse.
Local regulations and practices (Ontario-specific)
- Mortgage discharge must be registered in the Ontario Land Registry to clear the title. In Milton this is handled electronically by local real estate lawyers.
- Ontario lawyers commonly register discharges the same day if funds and documents are in order, but allow 1–3 business days for registration confirmation.
- No provincial tax is triggered by paying mortgage early. This is a lender/contract issue, not a tax event.
What to ask your bank and your Milton real estate lawyer right now
- Lender: “Please provide a written payout statement with expiry date and a breakdown of prepayment penalties, discharge fee, and wire instructions.”
- Lawyer: “Can you receive the payout funds, confirm discharge registration, and provide proof before closing? What are your fees and estimated timeline?”
Case study: Typical Milton scenario (quick)
Seller has a fixed closed mortgage with two years left. Buyer wants a 30-day closing. Seller asks lender for payoff and gets IRD of $2,500 vs three months’ interest of $900. Lender chooses IRD since it’s higher. Seller instructs closing lawyer to pay mortgage from proceeds; lawyer applies the payout amount on closing day and registers discharge; buyer’s lawyer receives proof and release of funds happens same day. Seller pays the penalty from the sale proceeds, avoids wiring funds early and ensures clean title.
Bottom line for Milton sellers
You can pay off your mortgage early before closing. But do it with a plan. Get a written payout statement, understand your prepayment penalties, use a local Milton real estate lawyer to register a discharge, and coordinate with the buyer’s lawyer so closing is smooth.
If you want a free pre-listing checklist and a lender-ready payout request template that I use with sellers in Milton, email me and I’ll send it now.
Contact for local help
If you’re selling in Milton and want this handled fast and clean, call or email: Tony Sousa — tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca. I’ll connect you with trusted Milton real estate lawyers and lenders who move quickly and keep closings on schedule.
FAQ — Quick answers Milton sellers ask about mortgage payoff, liens and selling
Q: Can I pay off my mortgage with sale proceeds at closing?
A: Yes. That’s the most common method. Your closing lawyer pays the lender and registers the discharge on closing day.
Q: Do I have to pay a prepayment penalty?
A: Possibly. Closed fixed mortgages often trigger IRD or three months’ interest — whichever is higher. Variable mortgages usually charge three months’ interest. Ask your lender for a written calculation.
Q: How long does a mortgage discharge take to register in Milton?
A: Usually same day to 1–3 business days if the lawyer has all documents and funds. Give yourself buffer time.
Q: What if there’s a second mortgage or HELOC?
A: Each secured debt must be paid and discharged. That may mean multiple payoff statements and discharge registrations.
Q: Who handles the discharge registration?
A: Your mortgage lender or your lawyer can register the discharge. In Ontario, lawyers commonly register it on your behalf using the electronic land registry system.
Q: Will paying my mortgage early affect my tax or capital gains?
A: No. Paying down or clearing a mortgage is not a taxable event. Taxes may apply to the sale itself (capital gains on properties not principal residences), but not the payoff.
Q: What if the lender won’t provide a payout statement quickly?
A: Escalate to the lender’s mortgage servicing department or your lawyer. Delays happen but they can be fixed with written demand and lawyer involvement.
Q: What if a lien shows up on title during the sale?
A: Your lawyer will identify it during title search and advise how to resolve it. Often it must be paid out before closing or the buyer may walk.
Q: Can paying off the mortgage before closing speed up the sale?
A: Sometimes. Paying a lien or HELOC before offers can remove buyer concerns. Often, however, sellers gain more by coordinating payoff at closing to avoid penalties and cash flow issues.
Q: Should I get a pre-sale title search in Milton?
A: Yes. A pre-sale title search finds mortgages, liens, and outstanding charges so you can clear issues before they threaten the sale.
Need local help? For a no-nonsense, quick review of your payout options and a free payoff checklist, contact Tony Sousa: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca. I specialize in Milton sales and work with local lawyers and lenders to close clean, on time.
