Real Estate Terms Dictionary

Certificate of Reduction

Definition of 'Certificate of Reduction'

A Certificate of Reduction is a document signed by a lender stating the loan balance, its maturity date and the interest rate.

What is a Certificate of Reduction:

Buying a property which has an unsatisfied mortgage debt attached to it is a common thing. Deciding whether to assume the mortgage or to go for a new mortgage loan or a cash sale is usually the next decision to take, and it can be a difficult one.

In many cases, the new buyers prefer to obtain a new loan, but when the current interest rates are higher than the interest rates of the existing mortgage, then accepting the liability of an existing mortgage can seem like a more lucrative option (see Assumption of Mortgage).

When a mortgage is being assumed, the previous owner asks the lender for a Certificate of Reduction which states the exact loan balance, the interest rate, and the maturity date.


Here's a real-life example from one of the properties researched on PropertyShark:

Certificate of reduction- example



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The glossary is intended to provide real estate professionals and home buyers with a basic understanding of various specialized terms related to legal rights over a property. All terms appear in public records such as ACRIS. We do not take responsibility for the legal accuracy of the definitions provided and ask that use of these explanations in a legal setting be made only after checking with a lawyer or another specialist in the field.