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Generally the loan would be paid out at settlement so no ongoing tax issues. If you suffer a capital loss then this would be carried forward to be offset from capital gains in the future. If you have a loan associated with the property which isn't paid out (e.g a separate LOC secured on...

The lender won't release the mortgage and you won't be able to settle without the mortgage discharged. You may be able to negotiate with the mortgage to convert the shortfall into an unsecured loan, but this would generally be not easy to do and they will be unlikely to forgive debts in this...