Key takeaways
- A payout statement gives a figure that is good as of, or through, a stated date — not an open-ended number.
- It commonly covers principal, accrued interest, any prepayment charge, fees and a per-diem — but what appears varies by lender.
- A prepayment charge may apply. On many closed fixed-rate mortgages it is calculated as the greater of three months’ interest or an interest rate differential, but that is not a universal formula — your mortgage contract sets it.
- Your lawyer requests it and pays the lender from your sale proceeds on closing. Registering the discharge usually happens after closing, often under an undertaking.
What is a mortgage payout statement?
A mortgage payout statement tells you what it costs to pay off your mortgage in full and have it removed from your property’s title. It is also called a discharge statement, because paying off the loan lets the lender “discharge” the mortgage — release its legal claim on your home. The figure is stated as good as of, or through, a particular date, and most statements carry an expiry date.
Your mortgage is paid out of your sale proceeds on closing. Removing the charge from title is a separate registration that usually follows afterward, under an undertaking your lawyer gives the buyer’s lawyer.
Think of it as the final bill on your mortgage: everything you still owe, plus the costs of ending the loan early, added into one number tied to a specific day.
What does the statement include?
A payout statement is more than your remaining balance, though what appears on it varies by lender. Institutional lenders, private lenders and alternative lenders format these differently and charge different things. A statement may include:
- Outstanding principal — the amount of the loan you still owe, not counting interest.
- Accrued interest — interest that has built up since your last payment and hasn’t been paid yet.
- Prepayment penalty — a charge for breaking a mortgage early (explained in detail below). Whether one applies, and how much, depends on your mortgage contract, its type (fixed vs. variable, open vs. closed) and your lender — it often comes up when you pay off a closed mortgage before its term ends.
- Discharge or administration fee — a fee the lender charges to process the payout and remove the mortgage from title.
- Per-diem (daily interest) — the amount of interest that accrues each day, included so the total can be adjusted if your closing date moves.
The per-diem is easy to overlook but genuinely useful. Closing dates sometimes move by a day or two, and rather than ordering a brand-new statement, your lawyer can add or subtract the daily interest to land on the correct figure.
What is the prepayment penalty, and how is it calculated?
A prepayment penalty is a fee that may apply when you pay off a mortgage before the end of its term. A “closed” mortgage is one that limits how much you can pay off early without a charge — many fixed-rate mortgages in Canada are closed, depending on the product. Selling your home usually means paying the mortgage off in full before the term is up, which can trigger this penalty, depending on your mortgage contract and lender.
There is no single fixed rule for the amount, and the greater-of formula people quote is not universal. It is typical of closed fixed-rate mortgages. An open mortgage can usually be prepaid without a charge at all. A closed variable-rate mortgage is more often subject to a straight three months’ interest charge rather than a rate differential. Private and alternative lenders set their own terms, which can include a bonus, a minimum interest period, or a charge structured quite differently. Where the greater-of method does apply, the two amounts compared are:
- Three months’ interest — roughly the interest you would have paid over the next three months, or
- The interest rate differential (IRD) — an amount based on the difference between your current interest rate and the rate the lender could charge today on a loan for the time left on your term.
Where this method applies, the lender compares the two and generally charges whichever is higher. The rate differential tends to be larger when interest rates have fallen since you signed, so it can be a significant sum. Because the amount is set by your mortgage contract and varies by lender and product, your payout statement is the reliable source for your real number.
If you are worried about the size of a penalty, ask your lender for an estimate before you commit to a closing date, and speak with your lawyer about how it will be handled.
How does your lawyer use the payout statement?
Your lawyer treats the payout statement as the instruction sheet for clearing your mortgage. Once it arrives, they use it in three main ways:
- They confirm the exact amount owed. The statement’s total tells your lawyer precisely how much of your sale proceeds must go to the lender.
- They pay the lender out of your proceeds. On closing, the buyer’s money comes in, and your lawyer sends the payout amount straight to your lender before releasing the rest to you.
- They deal with the discharge. This is the part sellers most often misunderstand. Paying the lender on closing and removing the mortgage from title are two different events, and they rarely happen on the same day. Most institutional lenders prepare and register their own discharge after they have been paid, which can take weeks or months. Where the lender does not, your lawyer registers it once authorised. In the meantime your lawyer typically gives the buyer’s lawyer a written undertaking to obtain and register the discharge, which is a personal professional obligation on your lawyer, and then follows up until it is done. If your reporting letter arrives while the discharge is still pending, it should say so.
In short, the payout statement is what lets your lawyer settle the mortgage on closing and start the discharge process. You do not deal with the lender directly for this — paying off and discharging a mortgage on a sale is handled by your lawyer.
How is it different from a routine mortgage statement?
It is easy to confuse the two, but they do different jobs. A routine mortgage statement is a periodic summary from your lender — how often you receive one depends on the lender and the product — showing your current balance, interest rate, payment amount and maturity date. It gives you a general picture of where your mortgage stands and is useful for your own records.
A payout (discharge) statement is prepared for a specific purpose: to pay the mortgage off completely on a set date. It is a precise, closing-day figure that includes the extra costs of ending the loan, such as the prepayment penalty and discharge fee, which a routine statement does not.
| Routine mortgage statement | Payout (discharge) statement | |
|---|---|---|
| Purpose | General update on your loan | Exact amount to pay off and discharge |
| Timing | Often yearly | Requested for a specific closing date |
| Includes penalties and fees? | No | Yes |
| Tied to a date? | No | Yes — the closing date |
The short version: your routine mortgage statement gives you a rough idea of what you owe, while the payout statement gives your lawyer the exact number needed to clear the mortgage on closing. When you sell, you need the payout statement — the routine one is not enough.