Did you know your mortgage is not automatically discharged once the loan is repaid?
There is a common misconception about what a mortgage is. Many people refer to the loan they take from the bank to purchase a house as ‘a mortgage’ and assume that once this is repaid it goes away. This is not quite how it works.
The loan that the bank extends to you is a contract between you and the bank for a particular sum of money, some interest charged and a repayment schedule. A mortgage is a legal document which is registered by the bank on the title to your property to provide security for the repayment of the loan.
When you pay back the money you owe on the loan, the loan contract may be at an end but the mortgage remains on the title until it is discharged.
Adding to the confusion is that banks often don’t suggest to you that when you pay off your loan that you then need to discharge the mortgage. When Certificates of Title were more commonly physical documents, the bank used to send you the title deed with a Discharge of Mortgage document attached to the back. Most people don’t realise that they need to register that document to clear the title and often still hold the title with a registered mortgage for years after the loan is repaid.
Now many titles are electronic and no physical title document exists. In these circumstances you need to use the PEXA system to discharge the mortgage from the electronic title. Your lender can do this for you if you ask them or you can request your solicitor to attend to this.
If you request your solicitor to arrange the discharge of mortgage, they will create a PEXA workspace, invite your bank/lender to the workspace and from there the bank/lender will prepare a Discharge of Mortgage document.
The discharge of mortgage document will be signed and lodged electronically by the bank/lender through the PEXA platform. Upon registration, reference to the mortgage is removed from the Certificate of Title. Then you officially own the property outright!
There are registration fees associated with discharging your mortgage and usually your lender will also charge a fee. If you would like any assistance with discharging a registered mortgage please contact us on 9976 5222 and talk to one of our solicitors about the process.
This information and information published on our website and social media sites is general in nature and for information and entertainment purposes only. This information does not constitute legal advice and should not be relied upon as such. If you require legal advice which takes into account your personal circumstances, please contact us for an appointment.