Refinancing the mortgage on your Canadian home is recognized as a legal transaction, and in the majority of cases, the support of a lawyer practicing in real estate is necessary. This is because the way the mortgage on your property title is registered must be fundamentally modified when refinancing occurs.
In accordance with Canadian law, a real estate lawyer must discharge the existing mortgage and register the new one. A lawyer’s trust account is required to ensure that the funds are properly handled. While some banks use third-party service providers to streamline this legal process, most refinances still require the expertise of a traditional real estate lawyer.
So, what actually changes during a mortgage refinance in Canada?
A number of important legal steps take place during refinancing, the first of which involves the current mortgage being formally discharged from the property title. Then, when the new mortgage is registered, the security interest is removed from the previous lender, while a new legal charge in the new lender’s favour is created. Funds are then advanced or adjusted according to the amount of the new loan, and the lender can go ahead and secure their interest against the property.
Although they may seem fairly straightforward, there are several verification and documentation layers involved with each of these steps, as well as legal registration.
Why is a lawyer needed for mortgage refinancing?
Below are the reasons why a real estate lawyer is required when refinancing a mortgage in Canada:
- Provincial legislation governs all property titles and imposes strict requirements for any changes to your ownership records.
- Mortgages are deemed legal instruments that create a security interest in your property, requiring formal legal execution to be valid.
- To keep all parties protected, trust funds must be set up and used to handle the funds.
- Registering a property title mandates legal certification and oversight.
It’s important to understand that refinancing doesn’t work in the same way as renewing a mortgage; a completely new legal agreement is created. By working with a real estate lawyer, you ensure that you fully understand the new mortgage terms and conditions. Furthermore, your lawyer verifies that the property title is free of defects, competing claims, or liens, and confirms that all necessary paperwork is compliant with provincial property law.
What does a real estate lawyer do during a mortgage refinance?
Edmonton real estate lawyers perform work that is critical to the success and legality of the refinancing process, including:
- Conducting a comprehensive title search to look for potential issues and verify ownership (should an issue be missed during this stage of the process, it could create significant problems for the homeowner)
- Preparing and registering discharge of old mortgage
- Drafting and registering a new mortgage with the Land Titles Office
- Handling of funds through a secure trust account
- Making sure that all parties have the correct legal documentation
- Checking property tax status and resolving any outstanding arrears
Refinancing a mortgage in Canada is a significant legal transaction rather than a simple administrative task. Because a local real estate lawyer must protect both your and the lender’s interests while the registered interest on your property title is modified, their assistance is essential. When planning to refinance your mortgage, you should always add a lawyer’s fees to your budget. Â
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