You may dream of the day you're mortgage-free but there's a bit more to it than simply paying off your loan. To terminate your home loan, you'll also need to officially discharge your mortgage. Understanding what's involved with the process can save you a lot of time, effort, and money.

What does it mean to discharge a mortgage?

When you take out a home loan, your lender will hold the title on your property until you have repaid your mortgage. Once your loan has been paid off in full, you'll need to go through a process of having the loan discharged and the lender removed from the title of your property. This involves making contact with your state or territory's land titles office.

In lending terminology, the process is called mortgage discharge, or mortgage release.

When do I need to discharge a mortgage?

In simple terms, you'll need to ensure your mortgage is discharged each time you terminate a home loan. This can be when:

1. You've repaid your home loan in full

Arguably the best reason - but paying out your home loan does not mean that the mortgage on your property is automatically discharged. A mortgage discharge needs to be filed and recorded at your state or territory's land titles office to legally release your lender from the title of your property.

2. You want to sell your property

If you plan on selling your home and you hold a home loan, it's important to make sure that your mortgage has been discharged during the settlement process to avoid delays. Any existing home loan will be registered on the property title as an encumbrance, limiting your ability to transfer the title of the property to a new owner.

See also: 11 mistakes to avoid when selling your home

3. You are refinancing your loan with your bank or another lender

If you refinance your home loan, you are essentially terminating one home loan and beginning another. Apart from a discharge cost, there may be other fees involved. You'll likely also need to discharge your mortgage if you are breaking a loan within a fixed term period, even if you remain with the same lender.

If you're looking to refinance, you may want to check the home loans on the table below which features some of the lowest interest rates on the market.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkComparePromoted ProductDisclosure
6.04% p.a.
6.08% p.a.
$3,011
Principal & Interest
Variable
$0
$530
90%
4.6 STAR CUSTOMER RATINGS
  • Available for purchase or refinance, min10% deposit needed to qualify.
  • No application, ongoing monthly or annual fees.
  • Dedicated loan specialist throughout the loan application.
Disclosure
5.99% p.a.
5.90% p.a.
$2,995
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender.
  • Backed by the Commonwealth Bank.
Disclosure
5.99% p.a.
6.44% p.a.
$2,995
Principal & Interest
Variable
$0
$530
90%
  • No application, ongoing monthly or annual fees.
  • Available for refinance or purchases. Quick and easy online application process.
  • Dedicated loan specialist throughout the loan application.
  • Discounted interest rate for 5 years for homes with an eligible solar system
Disclosure
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Important Information and Comparison Rate Warning

4. You want to remove a guarantor from your home loan

If you want to release a guarantor from your home loan, this also requires a mortgage discharge as you'll be ending the conditions of your old home loan and essentially be issued with a new one.

5. You want to swap your home loans to a new property

Home loan portability, sometimes called a security swap, allows you keep your existing home loan when you buy a new property. Some borrowers do this to avoid the costs associated with taking out an entirely new loan, especially when there may be break costs involved due to a fixed rate period. If your lender approves you keeping your loan for a new home, it will still need to do the paperwork to be removed from the old property's title and appear on the new property's title.

What are the steps involved in discharging your mortgage?

While failing to properly discharge your mortgage can have costly consequences, the process is fairly simple. Here are the steps you need to take when releasing your mortgage:

1. Contact your lender

The first step is to talk to your lender to discuss your intention. The lender should then ask you to fill out a discharge authority form, which you can often access on its website, to begin the process.

2. Finish the paperwork

In filling out the discharge form, you may need to provide the following information:

  • Details of all borrowers (including guarantors), properties, and home loan account numbers

  • Details of any authorised representatives for the discharge, including your solicitor, broker, and other lender

  • New lender (if applicable)

  • Bank state branch (BSB) and account numbers where you want refund or excess funds to be paid, or any fees or government charges to be debited

It's best that you complete and submit the discharge form as soon as possible, particularly if you're selling your property, as processing can take between 10 and 21 business days. Sellers may also be required to provide the contract of sale.

After you've submitted the required form and any other documents, it's wise to follow up with your lender to see whether the information you've supplied is in order so the discharge can progress.

3. Register the mortgage release

Once you have submitted the discharge authority form and any other documentation required, your lender will prepare the discharge of mortgage document. This must be registered at your state or territory's land titles office, either by your lender or yourself.

Should you decide to register the document on your own, it's best you check how the process will work through your state or territory's land titles office website. These should outline the steps you need to take as well as the fees you need to pay. Here are some quick links:

Digital property exchange platform PEXA also provides Discharge of Mortgage assistance for NSW, Victoria, WA, SA, ACT, and Tasmania.

How much does discharging a mortgage cost?

Lenders can charge anywhere between $160 and $700 to discharge a mortgage, and then there will be standard state or territory government fees on top.

The big four banks typically charge between $160 and $350 to discharge a mortgage while government fees can vary. Most states and territories will charge a flat fee for a standard mortgage discharge (between $132 and $232 at last revision in July 2024) although in Queensland, fees are multiplied according to the number of people whose names appear on the mortgage.

If you're refinancing your loan with the same lender, you may be able to negotiate with them to waive the lender's discharge fees on your old mortgage. It's always worth asking. But you likely won't be able to get out of paying the government fees.

Image by Polina via Pexels

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