What you should know about discharging your mortgage

By Mark Rosanes

Discharging your mortgage is one of the most important steps involved in your homeownership or investment property journey – and understanding how the process works can help you save a lot of time, effort, and money.

What does it mean to discharge your mortgage?

When you take out a mortgage, the bank holds the title on your property until you have completely repaid your home loan. Once you have paid the mortgage in full, you will need to go through a process to have the loan discharged and the lender removed from the title of your property. This process is called mortgage discharge or mortgage release.

But one important thing to remember is that discharging a home loan does not always happen at the end of a loan term. Here are the several instances that require you to discharge your mortgage with your lender.

1. You have repaid the full amount of your loan and want your lender to release the property from the mortgage

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’s Land Titles Office to legally release your lender from mortgage obligations.

2. You want to sell your property

If you plan on selling your house, it is important to make sure that your mortgage has been discharged to avoid delays in settlement. Any existing home loan will be registered on the certificate of title as an encumbrance, limiting your ability to transfer the title of the property.

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

When refinancing your home loan, you need a to discharge your mortgage because you are essentially closing one loan facility and opening another. Apart from discharge charges, there may be other fees involved, especially if you are breaking a loan within a fixed period

4. You want to remove a family guarantee from your home loan

If you want to release a family guarantor from your loan or line of credit, you need to do this through refinancing. This process also requires a mortgage discharge.

What are the steps involved in discharging your mortgage?

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

1. Contact your lender

The first step you need to take when discharging your home loan is to talk to your lender to discuss your intention. The lender will then ask you to fill out a discharge authority form, which you can often access from their website, to start 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
  • 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

If you are selling your property, it is best that you complete and submit the discharge form as soon as possible, as processing may last between 10 and 21 business days. It is also advisable that you visit your bank in person, so a professional can guide you through the process, ensuring that the mortgage discharge form is filled out correctly and lodged with the right department. Sellers may also be required to provide the contract of sale.

3. Register the mortgage release

Once you have submitted the discharge authority form, your lender will prepare the discharge of mortgage document. This document must be registered at your state’s Land Titles Office, either by your bank or yourself. Should you decide to register the document on your own, it is best that you check out the process through your state’s Land Titles Office website, where you can find the steps and fees you need to pay.

How much does discharging a mortgage cost?

Discharging a mortgage can cost between $160 and $600. The amount may vary from year to year and can be higher or lower depending on the state. In Queensland, for instance, the fee depends on the number of people who are paying the mortgage. The current rate is $175 for one and $350 if two parties are involved. This is on top of the break cost incurred when you refinance a fixed term mortgage.

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