This is again an important step and involves both the parties and their respective mortgage providers.
Once the evaluation is completed by the buyer’s bank, it will then formulate the final offer letter for the buyer and that’s when the process of paying off the seller’s mortgage begins. At this time Agent will request Sellers to produce a liability letter from the bank towards the outstanding mortgage amount on their property. Do note that all liability letters are valid for only 15-day; so don’t rush in ordering one; until the evaluation is done (bank will charge Seller for each a liability letter is asked).
Depending on the agreed selling price & outstanding amount to bank; in most of the cases buyer’s bank pays off the seller’s mortgage based on the liability letter provided to them. At this stage, the seller may have to sign some documents but he/she will be advised by the buyer’s bank or the mortgage consultant whether this is necessary.
The documents the seller may be asked to sign are the authority for his/her bank to accept the settlement of the loan and instruction to the bank to release the documents regarding the property once the mortgage is settled.
Once the buyer’s bank pays off the Sellers mortgage; then the seller’s bank will issue the “No Liability” letter; i.e. the clearance documentation. This generally takes five working days.