Paying off your very last mortgage repayment is a cause for celebration. All those long years of working hard and chipping away at your loan has finally ended. Or, perhaps you’ve sold your home and a new buyer is ready to move in.
Before you wave your home loan goodbye, there’s still one last important thing to do.
You need to complete something called a discharge of mortgage. Here's everything you need to know about how a mortgage discharge works and how much it costs.
What is mortgage discharge?
A mortgage discharge is a legal document that serves as proof that the property is no longer encumbered by the mortgage. It indicates that the mortgage has been repaid in full. For borrowers, this can be a significant milestone as it means that they have paid off their debt and have full ownership of the property.
When you have a home loan, the bank holds the Certificate of Title on your property until the home loan is repaid. As such, once the home loan is repaid, a mortgage discharge is needed to remove the lender from your title.
A mortgage discharge is also important for borrowers who are looking to sell their property, as they will need to provide evidence of the discharge to the new buyer.
How long does it take to discharge a mortgage?
Discharging a mortgage typically takes up to 10-15 business days to complete, however it does vary according to the lender. On the other hand, a partial discharge could take longer as the lender may wish to carry out property valuations.
When do you discharge a mortgage?
Here are the most common instances that require you to discharge your mortgage with your lender.
You’ve paid your home loan in full
Once you’ve made your final mortgage repayment and the outstanding balance is $0, you will need to go through the formal process of discharging the mortgage and receiving the Certificate of Title registered with the Land Titles office.
You’re selling your home
When selling a home with a mortgage, you’ll need to discharge it before any settlements are reached.
If you’re selling your home but want to keep your home loan for your next property, you can apply for a substitution of security. This transfers the mortgage from the title of the property you’re selling to the new one you’re purchasing.
You’re refinancing your home loan
When you refinance your home loan, you’re essentially closing one loan and opening an entirely new one. This will require a mortgage discharge as the new lender and mortgage will need to be on the property’s title.
You want to remove a family guarantor from your home loan
If the bank of mum and dad helped you get into your first home by offering to be a guarantor, you may want to release them from the loan down the line - this will require an internal refinance.
How do you discharge a mortgage?
The mortgage discharge process is quite straightforward. Here is the step-by-step process:
- Contact your lender - inform them about your intention to release the mortgage with them. Lenders will typically ask you to fill out a discharge authority form to start the process.
- Complete and return the discharge authority form - fill out the form with all of the correct information and return it to your lender in a timely manner. The form may require you to provide details of all the borrowers, details of any authorised representatives (e.g. broker), and the BSB and account numbers where you want refund or excess funds to be paid, or any fees or government charges to be debited.
- Register your discharge and Certificate of Title - After submitting your discharge authority form, your lender should prepare a Discharge Mortgage document which must be registered with the Land Title’s Office. Typically a lender does this on your behalf. If you do decide to register the document on your own, check out the correct process on your state’s Land Titles Office website.
How much does a mortgage discharge cost?
The costs involved often depends on the lender you’re with and also the circumstances under which you’re discharging your mortgage.
Some lenders will charge you a discharge or settlement fee when you end the terms of the contract with them. If your home loan was at a fixed rate and you’re paying it out early, you may need to pay break costs.
As a guide, a straightforward/standard mortgage discharge can cost anywhere between $200 to $800. For instance, in Queensland one of the fees that is charged is the ‘release of mortgage’ fee, which is dependent on the number of people involved who are paying the mortgage - $208 for one and $417 if two parties are involved.
If you’re looking to refinance your home loan, loans.com.au offer low rate home loans, and have a simple refinancing process so you can start saving on your home loan repayments sooner. Talk to one of your friendly lending specialists today!
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