Discharge of Mortgage

When you sell a property, one crucial step is discharging your mortgage. But what exactly does this mean and how does the process work? In this article, we'll explain what a discharge of mortgage is and walk through how it happens when selling your home using the PEXA platform.

What is a Discharge of Mortgage?

A discharge of mortgage is the removal of a mortgage from the title of your property. This happens once you have fully repaid your home loan, releasing the lender's security over the property and leaving you as the sole owner.

There are a few common scenarios where you would discharge a mortgage:

Paying off your home loan in full
Refinancing with a different lender
Selling your property
Removing a guarantor from the loan
Completing a security swap (transferring the mortgage to a new property)

When selling your home, the discharge of mortgage is a key part of the settlement process. It ensures you can transfer clear ownership to the buyer by removing the lender's financial interest in the property.

The Mortgage Discharge Process When Selling

Here's how discharging your mortgage works when selling your property in Australia:

Notify your lender that you are selling the property and will need to discharge the mortgage, either online or by contacting them directly.
Complete a discharge authority form and submit it to your lender. This gives them permission to start the discharge process.
Use the proceeds from your property sale to pay off any remaining mortgage balance, including outstanding payments, interest, fees, and discharge costs. Typical fees include:

Lender discharge fees: $275-325
Government registration fees: Varies by state, e.g. $175-$350.
Legal/conveyancing fees if you hire a professional to assist

The lender will prepare the official discharge of mortgage document and register it with your state's land titles office to remove the mortgage from the property title. Sometimes you may need to handle this registration yourself.
Once the discharge is registered, the mortgage is removed and the new owner receives the title showing no encumbrances.

The whole process usually takes around 10-15 business days and is typically handled in conjunction with your real estate agent and legal representatives as part of the overall property sale.

How PEXA Streamlines Mortgage Discharges

In the past, discharging a mortgage when selling a property involved a lot of paperwork, manual processes, and room for error. But the introduction of the PEXA (Property Exchange Australia) platform has revolutionized the process, allowing everything to be completed electronically.

Here's how discharging a mortgage works using PEXA:

Your conveyancer or lawyer creates a PEXA workspace for the property transaction and invites the other parties involved, including the buyer's representatives and the financial institutions.
Each party verifies their identity and gets a digital certificate to securely access the PEXA workspace.
Your legal representative prepares and signs the discharge of mortgage document electronically in the PEXA workspace, along with any other required documentation like the transfer of land.
The buyer's representative prepares and signs their documentation in the workspace, such as the transfer and any new mortgage.
On settlement day, the buyer's funds are transferred electronically to you via the PEXA platform, including the amount required to discharge your mortgage.
Once all funds are received, PEXA automatically lodges the discharge of mortgage, transfer, and any new mortgage with the relevant state land titles office. This removes your mortgage, transfers ownership to the buyer, and registers their new mortgage if applicable.
The sale proceeds are credited to your nominated bank account, usually within an hour of settlement. The buyer receives confirmation that the title has been transferred to them.

By enabling the entire financial settlement and lodgment process to occur electronically, PEXA offers some significant benefits:

Faster access to sale proceeds for the seller
Less paperwork and manual processing
Reduced risk of errors or delays with documents or cheques
Near real-time tracking of the settlement process
Enhanced security through encrypted document exchange

As a buyer or seller, you can also use the PEXA Key app to share bank details securely with your representatives and monitor the settlement's progress.

A Streamlined Discharge Process

Discharging the mortgage is a crucial final step when selling your home. It removes the lender's security interest in your property, enabling you to transfer clear ownership to the buyer.

While the process involves several steps, from notifying your lender to submitting the right documentation and paying associated fees, using the PEXA platform has made it much more streamlined and efficient. By allowing all parties to collaborate and transact digitally in a secure workspace, PEXA has transformed what was once a complex paper-based process fraught with potential delays.

With the ability to complete and lodge all the required documents electronically, PEXA saves time and reduces the risk of manual errors. Sellers can receive their sale proceeds within an hour of settlement rather than waiting days for cheques to clear.

So if you're selling your property, working with a legal representative who uses PEXA can help ensure your mortgage is discharged smoothly as part of the conveyancing process. It's one less thing to worry about as you focus on your move to a new home.

For expert assistance with discharging your mortgage and handling your property sale, contact Pearson Chambers Conveyancing today on 03 9969 2405 or email contact@pearsonchambers.com.au. Our experienced team will guide you through the process and take care of all the details, so you can sell your home with confidence.