How to discharge your mortgage and what that means

Ending your mortgage isn’t a simple matter of making the last repayment and dusting your hands. Lenders follow a discharge process.
Ava Crawford
Written by
Ava Crawford
Imogen Baxter
Reviewed by
Imogen Baxter
Last updated
May 17, 2024
0 minute read
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Mum and son playing in house with discharged mortgage

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.

Tip: Always check the Australian credit licence of a mortgage broker or conveyancer through the AFSL database.

 

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.

FAQs

What is the difference between mortgage discharge and foreclosure?

In a foreclosure, the lender seizes control of a borrower’s property because they can no longer repay their home loan (also called defaulting). The title of your property will belong to the lender in full. In a discharge of mortgage, the opposite is true: the lender is struck from your title.

In Australia, foreclosures aren’t common. Usually, the lender will leave the certificate of title in the homeowner’s name and control the remaining loan amount in “mortgage possession” until the property is sold. Doing this helps them recoup their costs.

What is the difference between a mortgage discharge and a settlement?

When you settle your home loan, you officially enter into an agreement with your lender to pay back the loan amount you borrowed, typically over a 20 to 30-year loan term at a specific interest rate. When you discharge your mortgage, you conclude this agreement and remove the home loan from the title of your property.

A mortgage settlement happens at the start of your home loan, while the mortgage discharge is at the end.

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Disclaimer
This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
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