New property sellers: Understand why it’s important to prioritise Discharge of Mortgage processing during the sale, and how to complete it successfully.
There is a lot to be done when selling your property, and sometimes inexperienced sellers may forget one important and time-sensitive step – to complete a Discharge of Mortgage with their lender – so that they are no longer obliged to make further payments on the loan.
Here’s some useful information on this matter:
- What is a discharge of mortgage
- Why is it important
- What are the steps for discharging a mortgage
What is a discharge of mortgage
It is the process of removing a lending institution’s name (and rights to your property) from the title of your property.
- When you buy a property with funds from a lending institution like a bank, your home loan from that lender is listed on the title of the property as an encumbrance.
- The bank holds the Certificate of Title until the whole loan is repaid. When the borrower no longer has the responsibility to repay the loan (for various reasons), the mortgage is discharged, and the lender is removed from the title of the property.
Why is it important
Doing it right can save you lots of time, money, effort, and stress.
Reasons for discharging a mortgage are:
- When the borrower sells the property.
- When the mortgage has been paid in full, but the paperwork for legally removing the lender from the title is not completed yet.
- When the borrower wants to refinance the property with a different lender.
- When removing a family guarantor from your loan or line of credit through refinancing.
Timely discharge of the mortgage updates your lending status (no more financial responsibility towards paying the said lender) so that you can take the next step. The mortgage will need to be discharged before the property settlement can occur in the process of selling your property.
- If you sell your property, you will usually instruct your bank to stop regular loan payments to the lender from the settlement date (so that you are not paying unnecessarily).
- If you sell your property but want to keep your home loan for your next property, you can then apply for a substitution of security, which moves the mortgage from your old sold property to your new purchased property.
- If you want to refinance your home loan with a new lender, the logical process is to discharge your mortgage with the old lender before refinance your home loan with a different lender at a lower interest rate.
The Discharge of Mortgage process can take 20 business days or more, due to administrative errors, delays in returning requirement documents, public holidays, or other delays. If the seller needs a partial discharge, the process could take up to six weeks or more. Therefore it is best to take care of it earlier, to minimise delays and incurring extra costs.
What are the steps for discharging a mortgage
#1 – Notify your lender.
#2 – Complete and return the Discharge Authority form to the lender.
#3 – Register your discharge and Certificate of Title at the Land Titles office.
#1 Notify your lender
Once you notify your lender that you have sold your property, they will ask you to fill out a discharge authority form. Most lenders would have them on their website. You may also need to provide your contract of sale. The whole process can take up to 20 business days or more, depending on the bank’s processing times, so do it as soon as you can.
#2 Complete discharge authority form
Provide required information like details of:
- All borrowers and guarantors’ loan account and properties
- Names of your authorised conveyancer, broker, and other lender if any.
- Bank details for accounts where you want surplus sale proceeds to be paid, or any fees to be taken from.
#3 Register with the Land Titles Office
The lender usually helps you with this step. Or, if you have sold your property, your settlement agent will take care of this for you. If you need to liaise with the Land Titles office yourself, please have a look at their website to know what to do and if there are any fees you need to pay. The Discharge of Mortgage process could cost between $160 and $600 – it depends on the lender involved and which Australian state the property is in.
How KDD Conveyancing Can Help With Discharge of Mortgage
Take advantage of our 30+ years’ experience in the Perth property settlement market to avoid potentially costly pitfalls. We can provide expert advice by reviewing your contract (which may be lengthy and technical) and explaining the impact that each section has on you as the seller.
Let our experienced property conveyancing practitioners at KDD Conveyancing Perth assist you. Our friendly and knowledgeable conveyancers know the settlement process well in Western Australia. Contact KDD on (08) 9296 8717 or by email today.
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