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Do I Need a Lawyer to Refinance My Mortgage in Alberta?

Do I Need a Lawyer to Refinance My Mortgage in Alberta?

Short answer: yes, in most Alberta mortgage refinances, a lawyer is involved before the refinance can close.

Refinancing is not just signing a new interest rate. It usually involves replacing, changing or adding mortgage financing secured against title to your home.

That means legal documents often need to be reviewed, signed, registered and funded properly.

The important point is simple:

A mortgage refinance is a real estate transaction, even if you are not buying or selling the property.

What Does It Mean to Refinance a Mortgage?

Refinancing usually means changing the financing secured against your home.

This may involve:

  • replacing your existing mortgage with a new mortgage;

  • increasing the mortgage amount;

  • switching lenders;

  • consolidating debt into the mortgage;

  • accessing equity from the property;

  • changing the borrowers on title or on the mortgage;

  • registering a new mortgage against title;

  • discharging an old mortgage; or

  • paying out other debts or registrations from the refinance funds.

Some refinances are straightforward.

Others are not.

The legal work depends on the lender’s requirements, the property title, the existing mortgage, the new mortgage and what the refinance funds are being used for.

Why Is a Lawyer Needed for a Refinance?

A lawyer is commonly needed because a refinance often requires legal steps that cannot be completed by simply signing bank forms.

A refinance lawyer may be responsible for:

  • reviewing mortgage instructions from the lender;

  • confirming the identity of the borrowers;

  • reviewing title to the property;

  • identifying existing mortgages, liens, caveats or other registrations;

  • preparing mortgage and closing documents;

  • explaining the mortgage documents to the borrowers;

  • obtaining signatures;

  • arranging title registration;

  • receiving mortgage funds in trust;

  • paying out the existing mortgage;

  • paying out debts required by the lender;

  • discharging old registrations where required;

  • sending net proceeds to the borrower; and

  • reporting to the lender after closing.

The lawyer’s role is to make sure the refinance is completed properly from a title, registration, payout and funding perspective.

Is Refinancing the Same as Renewing a Mortgage?

No.

A mortgage renewal and a mortgage refinance are not always the same thing.

A renewal usually means staying with the same lender and agreeing to new mortgage terms when the existing mortgage term ends. In many cases, a simple renewal may not require a lawyer.

A refinance is different. It may involve a new mortgage, a new lender, a larger loan amount, new registration on title or payout of other obligations.

That is why a refinance is more likely to require legal involvement.

The practical rule is this:

If the transaction requires a new mortgage to be registered or an old mortgage to be discharged, legal work is usually needed.

What Does the Lawyer Review?

Before closing, the lawyer will usually review the lender’s mortgage instructions and title to the property.

This may include checking:

  • the legal owners of the property;

  • whether all owners are signing the mortgage;

  • the legal description of the property;

  • the existing mortgage;

  • any lines of credit secured against title;

  • caveats, liens, writs or other registrations;

  • property tax status;

  • condominium status, if applicable;

  • payout statements for existing debt;

  • lender conditions;

  • insurance requirements;

  • identification documents; and

  • whether any title issue must be resolved before funding.

The lender may require certain debts or registrations to be paid from the refinance proceeds before the remaining funds are released.

What Documents Do You Sign?

The exact documents depend on the lender and transaction, but refinance signing often includes:

  • mortgage documents;

  • a promissory note or credit agreement;

  • disclosure statements;

  • title transfer or title-related forms, if ownership is changing;

  • payout directions;

  • tax or condominium acknowledgments;

  • statutory declarations;

  • identity verification documents;

  • trust ledger or closing statement;

  • direction to pay funds;

  • insurance confirmation; and

  • lender-specific forms.

If more than one person owns the property, each owner may need to sign, even if not everyone is receiving the refinance proceeds.

That can be important in family, separation, estate, corporate or co-ownership situations.

What If I Am Switching Lenders?

Switching lenders usually involves more legal work than a simple renewal.

The new lender will want its mortgage registered on title. The old lender will need to be paid out. The old mortgage will usually need to be discharged or otherwise dealt with.

The lawyer will typically:

  • request a payout statement from the existing lender;

  • receive mortgage funds from the new lender;

  • pay out the existing mortgage;

  • register the new mortgage;

  • deal with discharge of the prior mortgage;

  • satisfy any lender payout conditions; and

  • release any remaining funds to the borrower.

The timing matters.

If the existing mortgage is not paid out correctly, interest, penalties or discharge issues can arise.

What If I Am Borrowing More Money?

If the refinance increases the mortgage amount, the lender may have additional conditions.

These may include:

  • updated property insurance;

  • confirmation of income or employment;

  • payment of property taxes;

  • payout of credit cards or loans;

  • removal of registrations from title;

  • confirmation of condominium fees;

  • appraisal requirements;

  • spousal or co-owner signatures; or

  • independent legal advice in certain circumstances.

The lawyer does not usually approve the loan. That is the lender’s role.

But the lawyer helps complete the legal and closing steps required for the lender to advance funds.

What If There Is a Line of Credit on Title?

Many homeowners have a secured line of credit registered against title.

This can matter during a refinance.

The new lender may require the line of credit to be:

  • paid out;

  • reduced;

  • postponed;

  • discharged; or

  • left in place, depending on the lender’s instructions.

A secured line of credit is not always obvious from monthly banking records alone. It may appear as a registration on title.

The practical point is this:

Before refinancing, title should be reviewed to identify what is already registered against the property.

What If There Are Liens, Writs or Caveats?

A refinance can be delayed or blocked if title has unexpected registrations.

Examples may include:

  • builder’s liens;

  • writs of enforcement;

  • tax registrations;

  • caveats;

  • pending litigation registrations;

  • condominium-related registrations;

  • dower or spousal interests;

  • old mortgages that were never discharged; or

  • other secured interests.

The lender may refuse to fund until these issues are resolved.

Some registrations can be paid out from refinance proceeds. Others may require consent, discharge documents, court steps or further investigation.

The practical rule is simple:

A refinance can expose title problems that were not obvious before.

What If My Spouse Is Not on Title?

Spousal rights can matter in Alberta mortgage transactions.

Even if only one spouse is on title, a lender or lawyer may need to consider whether spousal consent, signatures or related documents are required.

This can be especially important where:

  • the property is a matrimonial or family home;

  • one spouse is not on title;

  • one spouse is not a borrower;

  • the refinance increases debt secured against the home;

  • the parties are separated;

  • one spouse is being removed from title or the mortgage; or

  • there are questions about occupancy or consent.

The practical point is this:

Do not assume only the person named on the mortgage will need to sign.

What If Ownership Is Changing Too?

Sometimes a refinance happens at the same time as a change in ownership.

For example:

  • one spouse buys out the other after separation;

  • a parent is added to title;

  • an adult child is removed from title;

  • a corporation is added or removed;

  • an estate transfer is involved;

  • a co-owner is being bought out; or

  • title is being changed for financing reasons.

This is more than a refinance.

It may involve transfer documents, tax considerations, lender approval, payout arrangements, releases and independent legal advice.

The practical rule is this:

Changing title and refinancing at the same time usually makes the transaction more complex.

Do You Need Independent Legal Advice?

Sometimes.

Independent legal advice may be required or recommended where one person is taking on risk for another person’s benefit.

Examples may include:

  • a spouse signing a mortgage but not receiving funds;

  • a parent guaranteeing or securing a child’s loan;

  • one co-owner benefiting more than another;

  • a borrower signing under pressure;

  • a private mortgage;

  • a second mortgage;

  • a reverse mortgage;

  • a separation or buyout situation; or

  • a transaction involving unequal bargaining power.

Independent legal advice helps confirm that the person signing understands the transaction, the risks and the consequences.

What Happens on Refinance Closing Day?

On closing day, the lawyer usually coordinates funding and payout.

The process may include:

  • receiving mortgage funds from the lender;

  • confirming all signing is complete;

  • registering the mortgage at Land Titles;

  • paying out the old mortgage;

  • paying out debts required by the lender;

  • paying legal fees and disbursements;

  • sending remaining funds to the borrower;

  • arranging discharge of old registrations; and

  • reporting to the lender.

The borrower may not receive funds first thing in the morning.

Funding can depend on lender timing, registration, payout confirmations and banking cutoffs.

The practical point is this:

Do not make same-day financial commitments until the refinance has actually funded.

How Long Does a Refinance Take?

The timeline depends on the lender and the complexity of the file.

A straightforward refinance may close relatively quickly once the lender has issued mortgage instructions and the borrower has signed.

However, delays can happen if:

  • lender instructions arrive late;

  • insurance is missing;

  • identification is incomplete;

  • property taxes are unpaid;

  • title has unexpected registrations;

  • payout statements are delayed;

  • a spouse or co-owner is unavailable to sign;

  • funds are coming from multiple sources;

  • the borrower is out of town;

  • independent legal advice is required; or

  • the lender adds last-minute conditions.

The practical rule is simple:

Start early. A refinance can be delayed by documents, title issues or lender conditions.

What Costs Are Involved?

Refinance costs may include:

  • legal fees;

  • title registration fees;

  • title search costs;

  • tax certificate or tax search costs;

  • courier or banking charges;

  • discharge fees from the old lender;

  • mortgage payout penalties;

  • lender administration fees;

  • appraisal fees;

  • title insurance, if required; and

  • other lender-specific charges.

The largest cost is often not the legal fee. It may be the mortgage payout penalty or lender charge for breaking the existing mortgage.

Before refinancing, the borrower should understand the full cost of the transaction, not just the new interest rate.

Can the Lawyer Act for Both Me and the Lender?

In many refinance transactions, the same lawyer acts for both the borrower and the lender for the limited purpose of completing the mortgage transaction.

However, the lawyer must still follow the lender’s instructions and cannot ignore title issues, payout requirements or lending conditions.

If a conflict arises, separate advice or separate representation may be needed.

This can happen where:

  • the borrower disputes the lender’s requirements;

  • one borrower does not understand or agree with the transaction;

  • there are concerns about pressure or undue influence;

  • independent legal advice is required;

  • there are competing ownership interests; or

  • the transaction involves unusual risk.

What If I Am Refinancing With a Private Lender?

Private mortgage refinancing can be more complicated.

Private mortgages may involve:

  • higher interest rates;

  • lender fees;

  • broker fees;

  • legal fees for both sides;

  • shorter repayment terms;

  • second mortgage registration;

  • default fees;

  • renewal fees;

  • strict enforcement rights; and

  • more complex payout obligations.

Before signing a private mortgage, the borrower should understand:

  • the interest rate;

  • the total cost of borrowing;

  • the term;

  • the payment schedule;

  • default charges;

  • renewal terms;

  • prepayment rights;

  • what happens if payments are missed; and

  • whether the mortgage can realistically be paid out or refinanced later.

The practical point is this:

Private mortgage money can solve an immediate problem, but the repayment terms matter.

What If the Refinance Falls Through?

A refinance may fall through if the lender refuses to fund, conditions are not satisfied or title issues cannot be resolved.

This can create problems if the borrower was relying on the refinance to:

  • pay out debts;

  • stop foreclosure;

  • complete a separation buyout;

  • fund renovations;

  • close another transaction;

  • pay tax arrears;

  • pay business obligations; or

  • consolidate urgent debts.

Until funds are actually advanced, the refinance is not complete.

The practical rule is simple:

Do not assume refinance proceeds are available until the lawyer confirms funding has occurred.

What Documents Should You Gather?

Before meeting with the lawyer, gather:

  • government-issued identification;

  • current mortgage statement;

  • payout statement, if available;

  • property tax bill;

  • home insurance information;

  • mortgage commitment or approval letter;

  • lender contact information;

  • title documents, if available;

  • condominium documents, if applicable;

  • separation agreement or court order, if relevant;

  • corporate documents, if a corporation is involved;

  • statements for debts being paid out;

  • void cheque or direct deposit information; and

  • any documents related to ownership changes.

Having these documents ready can help avoid delays.

Common Refinance Mistakes to Avoid

There are several common mistakes homeowners make during a refinance.

Do not confuse approval with funding. A mortgage approval does not mean funds have been advanced.

Do not wait until the last minute. Lender instructions, signing, insurance and title issues can take time.

Do not ignore payout penalties. Breaking an existing mortgage can be expensive.

Do not assume all title registrations are harmless. A lien, writ, caveat or old mortgage may delay closing.

Do not spend refinance proceeds before they are received. Funding can be delayed or cancelled.

Do not assume every owner or spouse can be left out. Co-owner and spousal signatures may be required.

Do not treat a private mortgage like a standard bank mortgage. Fees, rates and default terms may be very different.

What This Means Practically

Three rules are worth remembering.

A refinance usually needs legal work. If a mortgage is being registered, discharged or paid out, a lawyer is typically involved.

A refinance is not complete until it funds. Approval, signing and funding are separate steps.

Title matters. Existing mortgages, liens, caveats, writs, taxes and ownership issues can all affect whether the refinance closes smoothly.

Speak With an Alberta Real Estate Lawyer

If you are refinancing your mortgage in Alberta, the key issue is making sure the transaction closes properly and that you understand what is being registered against your home.

A refinance review should consider:

  • the new mortgage terms;

  • the current mortgage payout;

  • any penalties or discharge fees;

  • title registrations;

  • property taxes;

  • insurance requirements;

  • whether all owners must sign;

  • whether spousal consent is needed;

  • whether independent legal advice is required;

  • whether old registrations will be discharged; and

  • when funds will actually be available.

This article provides general information about mortgage refinancing in Alberta and is not legal advice. Refinance requirements are fact-specific and depend on the lender, title, mortgage documents and circumstances of the transaction.

Berjak Law handles Real Estate law matters in Edmonton and across Alberta.

 

Berjak Law

10080 Jasper Avenue, Suite 301
Edmonton, Alberta

780-879-0200

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