Your Mortgage Is Repaid—So Why Is the Security Still There?
When acting for a client on the sale of their home, it is not uncommon to hear them say “we don’t have a mortgage, we paid that off years ago”. However, repaying the lending does not necessarily mean that the security registered on the Record of Title is discharged.
What is a mortgage?
A mortgage is the security interest which gets registered on the Record of Title to your property; it is not the debt owed to the bank pursuant to your loan agreement, and this is often where the confusion arises.
If the debt is not repaid in accordance with the terms of your loan agreement, the mortgage is the bank’s security (or collateral) in the property, and it enables them to take steps to enforce the mortgage, usually by way of selling the property and using the sale proceeds to repay the debt owed.
What happens when a mortgage is repaid?
When you have repaid all funds owed to the bank, the mortgage remains in place until a specific release is requested. You will need to instruct your Solicitor to complete this on your behalf. In addition to legal fees, the bank will often charge a security release fee.
Once you have a clean Title, the lender no longer has a claim or security interest in the property.
Is there a benefit to leaving the security in place?
Yes. If you require additional funds from the bank, the security is already in place meaning there are no legal fees payable. You can simply sign the new lending documents at the bank without having to involve your lawyer.
If the security has been released and you later require further funding from the bank, you will need to instruct your lawyer to assist with the registration of a new mortgage.
If you’d like more information about this, or to discuss the options available to you, please contact our property team on 03 379 3880 to see how we can assist.
