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Mortgages & Liens

Discharges & Liens

Unless you have specifically agreed otherwise, your Agreement of Purchase and Sale (“APS”) will likely require you to pay out and discharge on or before closing any mortgages and liens that are registered against your property that are not being assumed by the buyers.  Liens may have been registered against your property to secure or enforce monthly payments for purchases like furnaces, appliances, windows, or for rentals of water heaters.  If you have signed a purchase or rental agreement for any such items that require monthly payments, please forward a copy to HomesLawyer.com so that we can determine the amount needed to pay out on closing any lien that may have been registered. 

Banks/Trust Companies vs. Individual/Corporate Lenders

If you have a mortgage with a bank or trust company, the standard form APS will allow us to use funds received from the buyers on closing to pay out and discharge that mortgage shortly after closing.  However, if the clause in the standard APS has been deleted, or if your mortgage is with an individual or corporate lender, a discharge usually must be registered on the closing date, meaning that you will have to arrange to have other funds available prior to closing so that a discharge can be registered on closing.

Mortgage Pay Out Statements

When you hire HomesLawyer.com, we will write to your mortgage lender to request a statement showing how much money is needed to pay out your mortgage on the closing date.  As of the closing date, this statement will commonly show the following amounts: 

            Amounts on Mortgage Pay Out Statements:

1. Principal balance of the mortgage;
   
2. Any interest accrued to the closing date;
   
3. An adjustment for your property tax account with the lender if you have been paying property taxes through your lender;
   
4. A prepayment penalty if your mortgage was closed;
   
5. An administrative fee for the discharge; and
   
6. Per diem interest chargeable if payment is received after the closing date.

Mortgage Prepayments

It is your responsibility to verify that the amounts shown on any mortgage pay out statement are correct.  In some cases, prepayment penalties can be large because they are often equal to the greater of three months’ interest or the interest rate differential of current mortgages with a similar term remaining.  However, you may wish to reduce this penalty by using any open prepayment privilege prior to closing that you may have with your lender.  There may be no prepayment penalty at all if your mortgage is fully open for prepayment or if you are arranging a new mortgage with the same lender for a home that you are buying.  In either case, you should continue to make all regular mortgage payments that fall due prior to the closing date.