Refinancing Your Home in BC: What the Lawyer Does and What to Expect

Refinancing your home can free up equity, consolidate debt or move you to a better rate, but the lender will not release a dollar until its mortgage is registered on your title and the old charges are dealt with.

This guide walks through what your lawyer does on a BC refinance, step by step, and what you need to have ready so the process runs smoothly.

What a refinance is, in legal terms

A refinance replaces or adds to the borrowing secured against your home. You might be taking equity out for a renovation, consolidating higher-interest debt, buying out a former partner, or moving to a lender with better terms. Whatever the reason, the legal work is the same at its core: a new mortgage has to be registered on your title, and anything it replaces has to be paid out and removed.

Registration is not a formality. Under section 20 of the Land Title Act, an instrument that charges land does not pass an interest in the land, except against the person who made it, until it is registered. Under section 28, registered charges rank according to the date and time the applications to register them were received, not the date they were signed. That is why your new lender will insist that its mortgage is registered, and that the mortgages it is meant to replace are paid off, before or as its money is released.

Do you need a lawyer to refinance in BC?

In practice, yes, or a BC notary. Once your lender approves the loan, it sends written instructions to the lawyer or notary you choose, setting out the conditions to be met before funds are released. The lawyer works for the lender on the registration and for you on the rest: explaining the documents, making sure the money goes where it should, and dealing with the old lender.

The steps, from approval to discharge

• Instructions and title search. We review the lender's instructions and search your title for anything registered against it: existing mortgages, lines of credit secured on the home, liens, judgments or a certificate of pending litigation. Anything unexpected needs to be dealt with before funding.
• Payout statements. We request a payout statement from your current lender and from any creditor the new loan is meant to pay. Check your existing mortgage for a prepayment charge before you commit; it is set by your contract and can be significant.
• Signing. You meet with us to sign the mortgage and the lender's other documents. Every registered owner usually has to sign, even if only one of you is borrowing. We verify identity, explain the payment terms and what happens on default, and confirm how the funds will be paid out.
• Registration and funding. The mortgage is registered electronically at the Land Title Office. Once the lender's conditions are met, it releases the funds to our trust account.
• Paying out. We pay the old mortgage and any debts listed in the instructions directly, then pay the balance to you.
• The discharge. We follow up until the old lender's discharge is registered and your title is clear. If a lender refuses or neglects to provide a discharge without just cause after payment is tendered, section 244 of the Land Title Act allows the owner to apply to the Supreme Court.

Consolidating debt: what to expect

When a refinance pays off credit cards, car loans or a line of credit, the lender often makes it a condition that those debts are paid from the mortgage proceeds rather than handed to you. We pay each creditor directly and keep confirmation. If you want an account closed rather than left open with a zero balance, tell the creditor in writing yourself; paying an account down does not close it.

Consolidation spreads short-term debt over a longer mortgage term. That can lower monthly payments while increasing the total interest you pay. The decision is yours and your lender's or mortgage broker's to model; our role is to make sure the documents match what you were promised.

The stress test and how long it takes

Federally regulated lenders apply the federal mortgage stress test to most new uninsured mortgages. The Office of the Superintendent of Financial Institutions currently sets the minimum qualifying rate at the greater of the contract rate plus 2% or 5.25%. OSFI does not expect lenders to apply it to a straight switch at renewal, but only where neither the loan amount nor the amortization increases. A refinance that takes out equity increases the loan, so expect to qualify at the higher rate. Credit unions are provincially regulated and may apply their own rules.

Timing is driven mostly by the lender: approval, any appraisal, and when the instructions arrive. The legal side then depends on how quickly payout statements come back and when you can sign. Plan around your current term's maturity date and any rate hold, and send us the instructions as soon as they are issued so nothing is rushed.

Use the refinance to check your title and your will

A refinance is a good moment to look at how your home is held. Owning as joint tenants means the survivor takes the home outside the estate; owning as tenants in common means each share passes under the owner's will. If your circumstances have changed since you bought, or if you are borrowing to help a family member, review your will and powers of attorney at the same time. Our article on when to update your will in BC covers the common triggers, and what a seller's lawyer handles explains how mortgage payouts and discharges work on a sale.

Refinancing your home? Bring us the lender's instructions early

Our real estate lawyers can review your lender's instructions, search title, prepare and register the new mortgage, pay out the old one and any debts being consolidated, and see the discharge through.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.