How discharging a mortgage works

Sending off your very last mortgage repayment is a cause for celebration. All those years of working hard, chipping away at your loan month after month, and you’ve finally made it. What next?

Or perhaps you’ve sold your home and the new buyer is ready to move in. Before handing over the keys there’s an important thing to do.

You need to complete something called a discharge of mortgage. Here's everything you need to know about it.

What is a discharge of a mortgage?

A discharge of mortgage occurs when details of a loan (an ‘encumbrance’) are removed from a property’s title document.

You may not be aware that your bank actually holds the title to your property until you have repaid your home loan in full. Even after you have repaid all your mortgage, you need to begin a process called ‘discharge of mortgage’ to ensure the encumbrance has been removed from the title.

When do you need to discharge your mortgage?

You will need to discharge your mortgage once you have repaid it in full, but there are also some other circumstances for discharging, including:

• Intention to sell a home. An existing mortgage would be listed on the title and could restrict you from transferring the title to the new owner. It can even reduce the property’s value. This can hold up the sale process and cost you money.
• Refinancing your home loan. Prior to refinancing you must formally discharge your mortgage to be able to close one loan and open a new one, even if it’s with the same lender. Depending on your home loan agreement, this may involve some discharge fees or break fees.

Do I have to discharge the mortgage in full?

No. You can complete something called a partial discharge. This may occur when you have more than one property covered by a single loan. You may have the option to release the encumbrance on one of those properties, without having to repay the entire loan.

How long does it take?

Time frames will vary depending on your lender, but typically it takes at least 10-15 business days to complete the discharge of mortgage. The length of time can vary.

A partial discharge can take at least six weeks to finalise.

How much does it cost?

The cost of discharging a mortgage varies between lenders, so it’s worth giving them a call to find out. The cost generally starts around the $200 mark, although it could be as high as $600. If you are using a conveyancer to handle the legal aspects of your property sale, they may take care of the mortgage discharge for you, and include the cost in their fee.

It’s also important to check whether you are up for any break fees, often levied when discharging or paying out early a fixed interest home loan.

Required paperwork

You’ll need to fill out a Discharge Authority form to complete the discharge. Here’s the information required to do this:

• Full names of all listed borrowers
• Home loan account number
• Property details
• Contact details for your solicitor or conveyancer, mortgage broker, or other financial institutions that may be relevant in your situation
• BSB and account number for bank account to be used for depositing any refund or debiting any additional fees

In some circumstances you may also need the following information:

• Offset account numbers
• Full names of any loan guarantors
• Contract of sale if the property has been sold

Step-by-step process

Discharging your mortgage is an important, yet relatively simple process that can be completed in just five steps.

1. Speak to your lender. Let them know about your intention to discharge your mortgage, and confirm the fees and how long it will take.
2. Contact a broker or conveyancer. If you would like help working through the process, you could speak with a mortgage broker or conveyancer. This is optional, since it is relatively straightforward to do yourself. However, if you are already using a conveyancer to handle the transfer of title, it may be convenient to have them take care of your mortgage discharge as well.
3. Fill in a Discharge Authority form. These are usually available on a lender’s website. Where possible, it’s useful to head into a branch to complete the form and ensure nothing has been overlooked. This also helps to make sure it’s lodged with the right department within a reasonable time frame.
4. Your bank registers the discharge of mortgage. Assuming the paperwork is all correct, your bank will prepare a Discharge of Mortgage document that must be lodged with the Land Titles Office. Your bank will often lodge this on your behalf, although they may send it to you to lodge yourself.
5. The discharge is finalised. Congratulations! You can now refinance, sell, or celebrate owning your own home in full.