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How to discharge a home loan

Organising a discharge of a mortgage involves notifying your lender, filling out a discharge form and registering this on the Certificate of Title.

A discharge of mortgage is when you remove a home loan from the title of your property. When you have a home loan, the bank holds the Certificate of Title on your property until the home loan is repaid. When you’ve paid the full amount off your home loan, you need to go through a process to discharge the mortgage and remove the lender from your title.

You also discharge a mortgage when you sell your house or refinance your home loan. As a refinancer, you are getting a new home loan and discharging the old one.

When do you have to discharge a mortgage?

Home loans are a long-term proposition, and when you take one out it’s doubtful you’re already thinking about the logistics of discharging it. However, there are a variety of circumstances that might require you to discharge a home loan, and not all of them fall at the end of the loan term.

1.) If you’re repaying your mortgage in full

Once you’ve paid off your entire home loan, you’ll have to go through the formal process discharging the mortgage. This includes if you have a split home loan and are paying off one part of it.

2.) If you’re selling your home

When you’re selling your home, an existing mortgage will be listed on your title as an encumbrance. That means it has to be discharged before any settlement can occur. If you’re selling your home but want to keep your home loan for your next property, you can apply for what’s known as a substitution of security. This removes the mortgage from the title of the property you’re selling, and adds it to the property you’re purchasing.

3.) If you’re refinancing with a different lender

When you refinance, you’re discharging a mortgage one home loan facility in order to open another, or with one lender in order to open a new home loan with a different lender. This will require a formal discharge of mortgage.

Should I keep my mortgage?

There are circumstances in which you could be better off choosing not to discharge your home loan. Let's say you've paid off almost your entire mortgage, but a big chunk of this is in extra repayments sitting in your offset account (or accessible via a redraw facility). This money has paid off the loan but its yours to access if needed. You might have put most of your savings there.

If you repay the loan entirely you're free of debt and you can discharge the mortgage. But all that money is gone. If you opted to keep the loan going and keep making small repayments on the remaining debt, you could keep the extra repayments accessible while you build up more savings outside the home loan. It depends on whether you need that money or not.

How do I discharge a mortgage?

Discharging a mortgage is a fairly straightforward process:

1. Notify your lender

Notify your lender to discuss your plans to discharge your mortgage. Your lender will then ask you to complete a Discharge Authority form. Most lenders either have the form on their site, or have an online portal for requesting the form.

2. Complete and return the Discharge Authority form

Next, complete the form and return it to your lender. If you’re selling your property, ensure you complete the form in a timely manner. It will take the lender at least 10 business days to process your request. You might want to think about completing the form in person at a branch so your lender can help you through the process.

3. Register your discharge and Certificate of Title

If you’ve repaid your home loan, the lender can either register your Discharge of Mortgage at the Land Titles office on your behalf, or they can send you both the Discharge of Mortgage and Certificate of Title to register at the Land Titles office.

Should you decide to register the Discharge of Mortgage yourself, you’ll need to know where to register and what fees are payable in your state or territory. You can find that information here:

What are the costs involved?

The costs involved will often depend on the circumstances under which you’re discharging your home loan. Depending on your situation, you may owe your lender discharge fees. It’s important to look closely at your home loan contract and communicate with your lender about what kinds of fees you could be facing.

If your home loan was a fixed rate and you’re paying it out early, you could owe break fees or penalty interest. For a look at some of the fees involved in breaking a fixed rate home loan, read our guide. Also, registering your Discharge of Mortgage and Certificate of Title can carry different fees depending on the state or territory in which you live. You can find links to the relevant fees for your state or territory in the list above.

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2 Responses

    Default Gravatar
    kapanacaNovember 21, 2021

    Is it worth using the redraw facility on a mortgage loan to pay off a personal loan and credit card

      AvatarFinder
      SarahNovember 22, 2021Finder

      Hi Kapanaca,

      It depends on your financial situation, your goals, and the way your debt is structured. Generally speaking, if you’re paying around 2% on your mortgage debt and 20% on your credit card debt, then redrawing funds from your home loan to repay your credit card could save you money.

      But your home loan is structured over 30 years, so you could be paying interest on these personal debts for decades. One way to do this well is to redraw the money from your home loan to repay a personal debt, but then continue making extra payments on your home loan (equal to what you were paying on your personal debt repayment every month) so you repay the extra debt quickly.

      The other key thing here is to make sure you close those personal debts and credit cards once you’ve repaid them. Otherwise, you risk adding more debt to your home loan AND creating more personal debt as well.

      Hope this helps!

      Cheers,
      Sarah

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