What is a discharge of mortgage?
Discharging a mortgage in Australia involves removing the mortgage from your property’s title. You’ll discharge a mortgage when you’ve paid off your home loan or for reasons such as refinancing or selling because lenders hold property titles as loan security.
To discharge a mortgage from your property, you and your lender will sign a form and submit it to the land title registry. You’ll also have to pay a registration fee. Your lender or buyer’s solicitor usually manages this process, typically taking 10-21 days.
Understanding the process and costs is essential.
When is a mortgage discharged in Australia?
There are a few common reasons for discharging a mortgage in Australia:
Paying off your home loan in full: Once you have paid off your mortgage in full, your lender will discharge the mortgage and release the title of your property back to you.
Refinancing: If you refinance your mortgage to a different lender, the new lender will pay off your existing loan and discharge it.
Selling your property: When you sell your property in Australia, the buyer will need to get a mortgage to finance the purchase. Once the buyer has closed on the sale, the lender will discharge the mortgage on your property.
Security swap: A security swap is a type of financial transaction in which two parties agree to exchange the ownership of one security for the ownership of another security. In mortgages, a security swap typically happens when borrowers refinance their mortgage to a new lender.
If the borrower uses a different property as security for the new loan, the lender must discharge the mortgage on the original property. That’s because the lender can only hold one mortgage on a particular property.
Guarantor removal: A guarantor is a person who agrees to be responsible for the repayment of a loan if the borrower defaults on their loan payments. The borrower may remove their guarantor if they can meet certain conditions. These include having the borrower make a certain number of on-time loan payments or building up a certain amount of equity in their property. Once the guarantor is released from the mortgage, the lender will also remove the guarantor’s guarantee.
Other reasons for a mortgage discharge include foreclosure or the homeowner’s death.
How to discharge a mortgage
Discharging a mortgage typically involves the following steps:
- Your lender will contact you to confirm the details of your mortgage discharge request.
- Your lender will prepare the mortgage discharge form. This document will need to be signed by you and your lender.
- Your lender will register the discharge with the land titles office. This step officially removes the mortgage from the title of your property.
- Your lender will send you a confirmation letter once the mortgage has been discharged.
The process typically takes 10 to 21 days to complete. However, it can take longer in some cases, such as if there are any complications with the title of your property.
Filling out a mortgage discharge form
A mortgage discharge form will vary from bank to bank and request to request. Typically, the form will be an interactive online tool asking you for the following details:
- Borrower names
- Guarantor names (if applicable)
- Home loan account number(s)
- Line of credit number(s)
- Everyday offset account number(s) (if applicable)
- Security or property details
- Contact details for any solicitors, broker or refinancing financial institutions involved
- Contract of sale (when selling the property).
Your lender will begin discharging your mortgage once you have submitted your mortgage discharge form and paid any required fees.
Fees when discharging a mortgage in Australia
The typical expenses associated with discharging a mortgage in Australia vary depending on your lender and the State you live in. However, some expected costs include:
Discharge fee: This is a fee your lender charges for discharging the mortgage. The Big Four typically charge between $150-350:
- Westpac: $350
- CommBank: $350
- NAB: $350
- ANZ: $150-600
Recording or document fee: This is a fee the government charges for recording the mortgage discharge in the public records. If you ask the bank to deal with the title deed, they will charge an additional fee for this service. For example, Westpac charges $150 for this service.
Solicitor fees: If you hire an attorney to help you with the discharge process, you will also need to pay their fees.