Mortgage Not Discharged After Payoff: What to Do in Ontario

You made your last payment, the lender confirmed the mortgage was paid, and yet a title search still shows the charge. This is stressful, especially if you plan to sell or refinance, but it is a common problem with practical solutions.

This article explains how a paid-off mortgage is normally cleared from title, what to ask your lender, and what options exist when the lender cannot be found. Your lawyer can confirm the right steps for your property.

Why a paid-off mortgage can still appear on title

Paying the debt and clearing the title are two separate steps. The charge is a registered document, and it stays on title until something is registered to remove it. In almost all cases, that means registering a valid discharge from the current chargee, who is the lender.

Registration is what gives a document its legal effect on title. A registered instrument is effective to create, transfer, charge or discharge the land as its nature and intent require. A payoff letter or zero balance statement is useful proof that you paid, but in almost all cases the charge itself comes off title by registering a valid discharge from the current lender.

Delays happen for ordinary reasons: paperwork stuck at the lender, a lender that merged or changed names, or a payoff made outside a real estate closing where nobody followed up.

How to get the lender to register a discharge

Start by confirming the debt is truly paid, including any final interest or fees. Then ask the lender in writing to register a discharge and to confirm when that will happen. Do not assume a particular number of days applies, since the timing depends on the lender and the circumstances, and a lawyer can confirm what applies to you.

• Get a written payoff confirmation showing a zero balance and the date of payment.
• Search title, or ask your lawyer to, to confirm which charge is still registered and who the current lender is.
• Send a written request to the lender's mortgage discharge department and keep a copy.
• Follow up in writing and keep notes of dates, names and reference numbers.
• If there is no result, have a lawyer write to the lender and explain next steps.

If the mortgage was transferred to another lender, the request must go to the current chargee, because that is the party who can provide a valid discharge.

If the lender cannot be found

Sometimes the lender no longer exists, cannot be located, or was a private individual who has died. Ontario has more than one route, but they are exceptions and they require proof.

If the lender was an individual who has died, every effort must be made to identify and contact the estate trustees before applying to the registrar, and the application will not be approved if they can readily be identified and located. A registered court order discharging a mortgage has the same effect as a registered discharge signed by the mortgagee.

Avoiding problems at payoff

Cost and timing at payoff are worth planning. Breaking a closed mortgage usually carries a penalty, generally the higher of three months' interest on the balance or the interest rate differential, plus a possible administration fee. With an open mortgage you can prepay without a penalty.

If you are refinancing, you may be able to require the lender to assign the debt and transfer the mortgage to a new lender you name, instead of discharging it, although this right does not apply if the mortgagee is or has been in possession. Ask your lawyer which approach suits your situation.

What to do next

• Gather your payoff letter, final statement, mortgage documents and a current title search.
• Write to the lender asking it to register the discharge and confirm the date.
• If you have a closing coming up, tell your lawyer at once so the discharge can be built into the closing plan.
• If the lender cannot be found, ask a lawyer whether a registrar application or a court order fits your facts.

Frequently asked questions