Can I Assume Someone's Mortgage in Alberta? Consent and Liability

Taking over a seller's or relative's existing mortgage can look simple: keep the payments and the interest rate, and move on. In practice, a mortgage is a contract between the borrower and the lender, and the lender has a say in who stands behind it.

This article explains the general picture in Alberta: what a mortgage on title is, why lender consent matters, what paperwork may be involved, and why the original borrower's responsibility needs a clear answer before anyone signs.

This article covers the law of Alberta.

What a mortgage is on title

Under the Land Titles Act, a mortgage is a charge on land created merely to secure a debt or loan. A registered mortgage has effect as security only. It does not operate as a transfer of the land, so the borrower stays the registered owner.

That matters when someone wants to take over a mortgage. The debt, the charge on title and the ownership of the land are separate pieces. Moving one of them does not automatically move the others, which is why each piece needs its own paperwork.

The lender's consent comes first

Whether a mortgage can be taken over by someone else depends on the mortgage contract and on the lender's willingness to accept the new person. The lender will usually want to review your income, credit and the property before agreeing. Because terms differ from lender to lender, a lawyer can confirm what your particular mortgage allows.

• Ask the lender whether it allows another person to take over the mortgage at all.
• Ask what the lender needs from the new borrower to approve them.
• Ask whether the interest rate, payment amount and term would stay the same or change.
• Ask whether any charges would apply and get the answer in writing.
• Ask whether the original borrower would be released from the debt.

The paperwork that may be involved

The documents depend on how the deal is structured. If the lender agrees to keep the existing mortgage and change its terms, an amending agreement may be used. An amending agreement that increases the principal is levied only on the increase.

If the lender instead replaces the old mortgage, the old mortgage is discharged and the new lender is added to title. A new mortgage is executed in the prescribed form, or to the like effect, by the mortgagor in order to be registered. A lender may also use a standard form mortgage, and a mortgage registered on those terms must state that it consists of them, set out the principal sum, and be dated and executed by the mortgagor.

Documents are submitted to a Land Titles office on the prescribed form, by mail or drop-off, with fees required at the time of submission. The mortgage levy on registration is $50 plus $5 for each $5000 or portion thereof of the principal secured. Once a document is registered, the submitter receives a registration notice.

Does the seller stay liable?

This is the question to settle before closing. A mortgage on title is discharged only when the Registrar enters a discharge, normally one in the prescribed form signed by the mortgagee. Once the discharge is entered, the land stops being liable for the principal sum or the part discharged. Whether the original borrower is personally released from the debt is a matter between that person and the lender, so look for a clear written release rather than assuming one.

Alberta also has a rule that, in a mortgage enforcement action, the lender's right is restricted to the mortgaged land, and a borrower cannot waive this protection. That rule does not apply to mortgages given by corporations, or to a high-ratio mortgage as defined in the regulations. Because of those exceptions, you should not count on it without legal advice about your situation.

What to do next

• Read the existing mortgage and renewal terms, or ask the lender for a copy.
• Contact the lender and ask about its process in writing.
• Ask whether the original borrower will be released, and get that confirmed in writing.
• Have a lawyer review the transfer, any amending agreement or new mortgage, and the release before you sign.
• Confirm what the lender will require on closing and what fees apply.

Frequently asked questions