DEFINITION of 'Reduction Certificate'

A document signed by a lender stating the outstanding amount on a mortgage loan. Properties that are encumbered by mortgages are frequently sold before the debt is satisfied. The sale of the mortgaged property most often involves a cash sale where the existing mortgage is paid off. In some cases, however, the buyer may assume the existing loan as part of the purchase price. In this case, the parties obtain a reduction certificate from the lender specifying the exact amount of money that is due on the loan.


A reduction certificate is also known as a "payoff statement".

BREAKING DOWN 'Reduction Certificate'

The option for a buyer to assume an existing mortgage is appealing during times of high interest rates. By assuming the existing mortgage, the buyer may be able to secure the lower interest rate associated with the loan, which may have been originated during a period of lower interest rates. The seller would need a release from the lender discharging him or her of any liability on the debt.

RELATED TERMS
  1. Satisfaction of Mortgage

    A document generated and signed by a mortgage lender, acknowledging ...
  2. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  3. Wraparound Mortgage

    A type of loan that enables a borrower who is paying off an existing ...
  4. Assumable Mortgage

    A type of financing arrangement in which the outstanding mortgage ...
  5. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  6. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
Related Articles
  1. Personal Finance

    How Do Mortgage Lenders Get Paid and Make Money?

    When homebuyers educate themselves on how mortgage lenders get paid and make money, they are more likely to save thousands of dollars on their mortgages.
  2. Personal Finance

    Shopping for a Mortgage in 2017? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2017 can all be done online.
  3. Personal Finance

    Shopping for a Mortgage? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgage rates for 2016 can all be done online.
  4. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  5. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  6. Investing

    Who is Ruling the Jumbo Mortgage Market?

    The jumbo mortgage market appears to be booming this year, despite the few economic hurdles everyone's battling. Here's who is ruling the industry.
  7. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  8. Personal Finance

    5 Things You Shouldn't Tell Your Mortgage Broker

    Applying for a mortgage can be a strenuous process. Here are five things to avoid doing when meeting with your mortgage broker.
  9. Personal Finance

    Mortgage Broker vs. Direct Lenders: Which Is Best?

    There are key differences between mortgage brokers and direct lenders. Here's how to choose which is best for you.
RELATED FAQS
  1. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  2. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  3. What are the benefits of an assumable mortgage?

    An assumable mortgage allows the purchaser of a property to assume the mortgage from the property's seller. The benefits ... Read Answer >>
Trading Center