I think I've figured out what's going on. Your f-i-l gave your husband his inheritance early so he could buy a house. But then the two of you got married. Your f-i-l didn't want you to get half of that inheritance money if you ended up getting divorced and selling the house. So he put a lien on the home for that amount and didn't intend to take back the money unless you divorced and the house was sold.

Too bad that your f-i-l had a lawyer who didn't know how to protect him. He could've just given your lender a subordination of mortgage when you refinanced the property and his lien would have continued as a second mortgage. But he discharged it instead and issued a payoff statement showing a $0 balance so now he has no way of proving that you and your husband owe him any money. So I can't see any way that he can get a new lien on the property.

Of course all of this is based solely on what you've told us here. If your f-i-l has any other paperwork signed by your husband where he admits that he owes your f-i-l the money then you will have a problem. It might be a good idea to speak with an attorney in your area to make sure that you don't have a problem.

Do you think that the Ontario statue of limitations does kick in on our behalf as well?
Since it was discharged in dec 2004.
And Just a comment FYI my husband had been astranged from his family at age 10 as the stepmother threw him to the streets to live and he so did. And later in years his father approached him with this gift(so he thought) as a way to make up?
He didn't know anything about mortgages etc. His father told him he had sold a property on the east coast and that is why he was able to give this money. Later his father told him he had to invest it so that he didn't have to pay taxes?

I'm not familiar with the laws in Ontario but if there is a 2 year statute of limitations then your f-i-l is out of luck there as well.

Tell your husband that he should never, ever sign anything unless he has his own attorney who tells him that it's OK to sign. :)

Thanks so much, you guys are #1, thanks for not giving up on my confusing questions.