What a mortgage discharge fee means in Canada and when borrowers may face it on payoff, sale, or lender switch.
A mortgage discharge fee is a fee a lender may charge when the mortgage is being discharged and the lender’s rights are removed from the property’s title.
Borrowers often focus on prepayment penalties and forget about discharge costs. This fee can appear when you pay off the mortgage, sell the property, or change lenders.
FCAC says that when you request a mortgage discharge, your lender may charge fees and that federally regulated lenders must disclose the mortgage discharge fee in the mortgage contract. FCAC also notes that some provinces and territories regulate the maximum amount, while in other places the lender may set its own fee.
Discharge fee is separate from an early-break penalty. A borrower may face both if the mortgage is being ended before the term expires.
You switch lenders at renewal or sell the home before the old mortgage is naturally discharged. In addition to any penalty issues, the lender may charge a mortgage discharge fee as part of removing its interest from title.
The discharge fee is not the same thing as the entire legal cost of a discharge. Borrowers may also face land-registry or professional fees through their lawyer or notary.
Borrowers also sometimes assume the fee applies only when the mortgage is fully paid off. It can also arise when changing lenders or selling the property.
The amount depends on lender policy and local regulation. Related professional and land-registry fees can add materially to the total discharge cost.