Reduction Certificate Law and Legal Definition

A reduction certificate is an instrument signed by a lender that shows the current amount of the unpaid balance of a mortgage, the rate of interest, and the date of maturity. It is also known as a payoff statement. Parties obtain a reduction certificate from a lender specifying the exact amount of money that is due on the loan. It is normally required from a mortgagee when a prospective purchaser is to assume or to take title subject to an existing mortgage. Later on, the mortgagee cannot claim that the mortgage amount or terms were different from those stated in the certificate. It is useful because only the original amount of the loan is a matter of public record. It is also called a statement of condition from a lender, or a beneficiary statement in a deed of trust situation.