When you buy a property with a home loan, it doesn’t just belong to you. Your lender’s name will be alongside yours on the certificate of title. Because of this, ending your mortgage isn’t a simple matter of making the last repayment and dusting your hands. Lenders follow a discharge process.
In a discharge of mortgage, your home loan (sometimes called an encumbrance) is officially removed from the title of your property. Essentially, your home officially becomes your own — no lender is involved.
So to help borrowers stick the landing, let’s walk through the discharge process in Australia and how home buyers can make the most of it.
When should borrowers discharge a mortgage?
Borrowers discharge their existing mortgage whenever they refinance, sell their property, or finish their last repayment.
You don’t have to pay your home loan in full to discharge it. Instead, you can complete a partial discharge whenever refinancing or selling.
How much does it cost to discharge a mortgage?
Discharge fees vary between lenders — some may not have any at all. For those that do, a mortgage discharge can cost between $100 - $300.
Fixed-rate home loans may also have break costs associated if you are ending your loan term early. Variable-rate home loans usually have lower discharge fees.
For first-home buyers, it’s vital to compare discharge fees and break costs when researching home loan offers. These fees are often included in the comparison rate (alongside your interest rate).
For homeowners refinancing to a different lender, these fees may be part of the application process.
Should I make extra repayments on my home loan?
How do borrowers discharge their mortgage?
The discharge of mortgage process usually involves three different parties:
- The homeowner
- The lender
- The land titles office of your state or territory.
Because of this, the discharge process changes depending on where you live.
For example, if you live in Sydney, the NSW Land Registry Services no longer requires you to show a Certificate of Title when discharging your mortgage. In other states, it is mandatory.
So what is the discharge process like, step by step? Let’s break it down.
Step one: Assemble your paperwork
To start a discharge of mortgage, you’ll need the following:
- The legal names of everyone on your home loan, including your guarantor
- Your home loan account number, including any offset account numbers or redraw facilities
- Your property details, such as the address and certificate of title
- Your debit or credit card details to pay any discharge fees
It may also be good to have on hand the contact details of your mortgage broker, conveyancer, private banker, authorised representatives, and any other financial institution that helped you buy your home, such as the NSW First Home Owners Grant.
If you’re selling your property, you may also need the contract of sale. Refinancers may need their outstanding loan amount and loan-to-value ratio (LVR).
Step two: Let your lender know
Once your paperwork is assembled, tell your lender you plan to discharge your mortgage. Ask questions about any discharge fees you must pay and how long the discharge process will take (typically 10 - 15 business days).
If you’re leaving a fixed-rate home loan before your loan term is up, you may have to pay break costs. Your loan’s product disclosure statement and target market determination will include these details.
Step three: Get a mortgage broker or conveyancer
If you need extra help, a mortgage broker or conveyancer can help discharge your home loan.
For example, if you’re moving to a new lender, a mortgage broker can do a lot of the paperwork for you. If you’re selling a house, your conveyancer may already have the title of your property.
Step four: Fill out a discharge authority form
Next, fill out the discharge authority form. This document tells your lender to start the discharge of mortgage process and release the security of your home loan to you.
Your lender will usually have a discharge authority form available on their website or at their branch. If you have questions and or want to make sure every box gets ticked, filling out a discharge of mortgage document in person can be helpful. You can also ask the lender to send a copy to you.
Once you’ve filled out the discharge authority form, you must pay any discharge fees or break costs.
Step five: Your lender prepares a mortgage discharge form
If everything looks correct, your lender will fill out a mortgage discharge form and send it to the land title office. If your lender doesn’t do this step for you, you must do it yourself.
If the land titles office approves the discharge, your home loan will be removed from the title of your property.
Step six: Finalise your discharge of mortgage
If all goes smoothly, your paperwork is approved, and your mortgage is discharged. Now you can sell, refinance, or simply enjoy the home you officially own.
In summary
Exiting your home loan is a significant change to your financial situation, no matter if your selling, refinancing, or making your final repayment.
It’s important for home buyers to keep the discharge of mortgage process in mind when researching and applying for home loans since there are fees and legal requirements involved.
