If you own real property and borrowed money from a bank or financial institution to use towards the purchase, then it is more than likely that the lender will register a mortgage over the property to protect its interests, and without knowing it, you may need a Release of Mortgage.
In simple terms, the registration of a mortgage over your real property means that the lenders interest is detailed on your title, and most dealings with the property after registration will require authorisation or approval from the lender in order to proceed. It is also used by the lender to secure repayment of its money in the event that you default on your loan.
While most people are familiar with a mortgage and the registration of the mortgage on title, many are unfamiliar with the procedure that should occur after a loan has been paid out or if the property is sold prior to the loan being repaid in full.
When a loan has been paid out in full (e.g. the property has been owned for 30 years and the owners have paid the entirety of the loan to the lender)
Once a loan has been fully paid, in the course of closing a loan account the lender will generally organise for a Release of Mortgage form to be issued and completed, and will provide this to the customer upon closing the account.
The Release of Mortgage is an original document prescribed by the Titles Registry Office, which must be signed and correctly witnessed by an authorised person at the bank or financial institution, and is the document that should be registered with the local Land Titles Department in order for the registered mortgage to be removed off the title to the property.
Unfortunately, we often see clients who have been provided with the original Release of Mortgage document by their lender, but were not given any further instructions in relation to what to do with the document and it is often either tucked away in a safe, or has sadly been destroyed or misplaced.
In any event, even though the loan may have been paid out and the client assumes that they no longer have a mortgage, until that document has been registered with the Titles Registry Office, the mortgage will remain on the title to the property.
In several cases we have seen clients who thought that they didn’t have a mortgage, listed their property for sale and were then unable to settle on the due date because they no longer had the original release of mortgage that had been issued by the bank when their loan was finalised. This type of occurrence can have significant financial implications for sellers if they breach the contract.
Affinity Lawyers encourage all of our clients who own property and who have paid out their loans to check whether they are still holding an original Release of Mortgage, and if so, our property team are able to assist them with registering these documents to ensure their mortgages are removed.
There is an associated registration fee of approximately $192.00 charged by the Titles Registry Office for the registration of the document.
When a property is being sold prior to the loan being repaid
When a property is sold prior to the loan being repaid, the lender will require full repayment of their loan before they will allow the property to be transferred to the new owner.
Generally, the seller of the property will need to contact their financier as soon as possible once a contract has been signed to let them know that the property has been sold, and to request that they prepare discharge paperwork. The financier will then process the request and prepare to issue an original Release of Mortgage which is provided to the buyer’s solicitor at settlement of the property, in return for a cheque in full satisfaction of the outstanding loan amount owed to the financier.
Most financial institutions require at least fourteen (14) days to prepare the paperwork, with some needing longer. Therefore, it is vitally important that a seller liaises with their lender as early as possible in the process to ensure that there is sufficient time for the paperwork to be processed.
If you are contemplating selling a property and you have a mortgage over it, then it is strongly recommended that you contact your bank for an up-to-date balance on your mortgage and whether there will be any break costs as a result of paying out the mortgage. While it won’t be an exact amount, it will provide you with a general ballpark figure to work with and to use in your calculations to ensure that you are not short-changing yourself, and leaving yourself unable to effect settlement (and thus opening yourself up to significant legal ramifications) if you sell the property for less than is needed to discharge the mortgage.
