Selling a Home in Nova Scotia With a Mortgage: Payout Steps

Most homeowners who sell still owe money on their mortgage. That is normal, and it does not stop a sale. The lender is paid from the money the buyer pays, and the mortgage is removed from the title.

This article walks through the usual payout steps in Nova Scotia, what you should ask your lender about penalties and fees, and how your lawyer handles the discharge on closing day. Exact amounts and rules come from your mortgage contract, so the details below are about the process rather than numbers.

This article covers the law of Nova Scotia.

How the payout works in plain terms

When you sell, the buyer's money goes through the lawyers on closing day. Out of that money, your lawyer pays what you owe the lender, along with any other amounts that must be cleared from the title. What is left over, after the sale costs, goes to you.

• The buyer pays the purchase price through the lawyers.
• Your lawyer pays out the amount your lender says is owing.
• The lender's mortgage is discharged so the buyer takes the property free of it.
• The remaining funds, after costs, are paid to you.

Prepayment penalties and discharge fees

Paying off a mortgage before the end of its term can trigger a penalty, and lenders may also charge fees for preparing the discharge. How much depends on your mortgage contract, your lender, the type of mortgage and how much time is left in the term. There is no single figure that applies to everyone, so do not rely on a general number.

Ask your lender for a written payout statement showing the principal, interest, any penalty and any discharge or administration fees, and the date to which it is calculated. Interest keeps accruing, so the final figure depends on the closing date. Your lawyer will request an updated statement closer to closing.

If you are buying another home at the same time, ask your lender whether the mortgage can be moved to the new property and how that affects any penalty. This depends on your contract and the lender's policies.

What your lawyer does on closing day

Most land documents in Nova Scotia are submitted electronically by authorized lawyers, and the province recommends a lawyer for real property transactions, including identifying the correct PID and matching the legal description to the parcel. A PID is a parcel identification number. Electronic registration is done through lawyers who hold the Property Online authorized lawyer user agreement and a pre-authorized debit agreement with the Minister.

In practice, your lawyer arranges the lender's payout figure, confirms the discharge will be provided, pays the lender from the sale funds, and makes sure the discharge is dealt with so the buyer receives clear title. How and when the lender releases its claim can vary by lender, so your lawyer will confirm the process for your mortgage.

Other things that can affect your proceeds

Besides the mortgage, other amounts may come out of the sale proceeds, such as real estate commission, legal fees and adjustments for things like property taxes. Municipalities apply their rate to the assessed value of the property, with assessments determined by the Property Valuation Services Corporation, so your tax adjustment depends on your municipality and your assessment.

Municipal deed transfer tax is a separate municipal tax collected through Land Registry when the deed is registered, and the purchaser files the Municipal Deed Transfer Affidavit of Value. Each municipality sets its own rate, and how this applies to your sale depends on your situation, so it is worth confirming with your lawyer before you sign.

If your buyer lives outside Nova Scotia, a provincial non-resident deed transfer tax may apply to the buyer's purchase. Your lawyer can explain whether that affects your sale.

What to do next

• Find your mortgage contract and note the term, rate type and prepayment terms.
• Ask your lender for a written payout statement and ask what fees apply to a discharge.
• Talk to a lawyer before you sign a listing or purchase agreement, so the closing date and payout timing fit together.
• Tell your lawyer about any other debts or claims registered against the property.
• If you are buying another home, ask your lender whether you can move your mortgage.
• Ask your lawyer for a statement of adjustments showing what you will receive.

Frequently asked questions