You might be celebrating when you make that last payment on your mortgage, but don’t forget to take the last step to cut ties with the bank for good.
What is the next step?
Many people are not aware that they have to register a Discharge of Mortgage after paying off their mortgage. While paying off the mortgage ends the debt to the bank, it does not remove the “mortgage” from the title of your property. The mortgage is a charge registered on your property that prevents you from dealing with it without the consent of the bank.
After you have paid off your mortgage, you should speak to your bank about getting the mortgage properly discharged from the title. This is an extra step, and does involve extra costs, but is worthwhile for ensuring that your property is unencumbered.
What happens if I don’t take that next step?
If you don’t register the Discharge of mortgage you might discover later, for example when you are selling your house, that there is still a registered mortgage on your property. By that time the bank may not be provide the discharge immediately and it can cause delays.
What happens if I don’t take that next step and a significant amount of time has passed?
Consider the case recently encountered where a client paid off their mortgage some 30 years ago and failed to take the next step and register the discharge of mortgage. The first problem that arose was that the financial institution was no longer in existence as it had been deregistered by ASIC. A search was conducted which revealed that the financial institution was acquired by another financial institution.
This new financial institution was contacted and it took some months for them locate a signed Discharge of Mortgage which was signed by the original financial institution.
Problem solved! Well not quite. The original Discharge of Mortgage was not signed correctly and could not be registered at the Land Titles Office. It could not be corrected as the original financial institution was no longer in existence.
There are two mechanisms that can be used to have the document signed. ASIC can sign the document pursuant to Section 601AF of the Corporations Act or an application can be made to the Supreme Court seeking an order that the Registrar of Titles register the discharge pursuant to section 103 of the Land Titles Act.
In this case ASIC signed the Discharge and our client received the new clear title but at significantly greater cost than should have been paid had they not delayed. It would have been even more expensive if an application to the Supreme Court was required.
If you take steps to discharge your mortgage as soon as possible after paying out the loan, most problems can be avoided. If you have any concerns about the title of your property, remember that you can always find the most updated version of your property title by ordering a title search for your property. Please feel free to contact us if you have questions about this.
In the event that you have concerns about your title, our Chamberlains Property Team are experts in solving unexpected property issues with timely, competent and cost-effective service.