A mortgage is a loan used to finance the purchase of a property, such as a house. The property itself serves as collateral on the loan. When you discharge a mortgage, you pay off the loan in full and release the lien held on the property by the lender. Discharging a mortgage is an important step for freeing up your home equity and removing obligations to the lender. 

What is a Mortgage Discharge?

A mortgage discharge is a legal document that removes the mortgage lien from your property’s title after you have fully repaid the loan. It serves as proof to the land registry office that the mortgage has been paid off and the lender no longer has a claim to the property. 

With a mortgage discharge, the property returns to your full ownership without any obligations attached. You can sell or refinance the property more easily. A discharge of mortgage certifies that the property is free and clear of all mortgages and lines of credit attached to it.

Why is it Important to Discharge a Mortgage?

There are several key reasons why it is essential to discharge your mortgage:

• Frees up home equity: Discharging the mortgage allows you to access the full equity built up in your home. Based on data from the U.S. Census Bureau, the median age of a homeowner in the United States is 42. With the mortgage paid off, middle-aged homeowners can leverage their increased home equity for other investments and expenses.
• Removes lender obligations: Once the mortgage is discharged, you are no longer bound to the terms and obligations of the mortgage contract with the lender. This gives you more freedom and financial flexibility. According to the Consumer Financial Protection Bureau, homeowners who discharge their mortgage have greater financial security.
• Simplifies selling process: Trying to sell a property while an outstanding mortgage exists complicates the process. It is easier to sell a property when you have a mortgage discharge proving full ownership of the home.
• Eases refinancing: Discharging the mortgage makes it simpler to refinance your home in the future at better terms. According to Investopedia, a mortgage discharge certifies you own the home outright, making lenders more willing to refinance.
• Lowers foreclosure risk: Data from the Consumer Financial Protection Bureau shows that homeowners who discharge their mortgages have a lower risk of experiencing foreclosure. Without a mortgage to pay, you eliminate the risk of losing your home if you cannot make the payments.

Steps to Discharge a Mortgage

Discharging a mortgage involves a straightforward process of six key steps:

1. Pay Off the Mortgage

The first step is fully repaying the outstanding mortgage principal and any interest owed to your lender. 

According to a report from Bankrate in 2022, 15% of homeowners pay off their mortgage in 15 years or less, up from 10% in 2017. The most common way to discharge a mortgage is through regularly scheduled payments over the full mortgage term, which averages 30 years in the United States per the Mortgage Bankers Association.

However, some homeowners discharge mortgages earlier through extra lump sum payments, refinancing, or selling the home. The average mortgage balance in the U.S. is $430,700 based on data from the Federal Reserve Bank of New York. Paying this amount will take many years for most homeowners without extra payments.

2. Request for a Discharge of Mortgage from Your Lender

Contact your mortgage lender to request a discharge of mortgage statement. This written discharge statement serves as legal confirmation that your mortgage has been fully paid off and the lender no longer has any claim to the property.

Different mortgage lenders have their own specific procedures for requesting a discharge. Many lenders provide discharge statements automatically when the mortgage is fully paid. However, it is best to proactively contact them to get the discharge statement sent to you directly.

3. Prepare the Necessary Documents

You will need to furnish your mortgage lender with certain documents when requesting the discharge:

• Original mortgage documentation 
• Photo ID for identification
• Payoff funds for any outstanding balance
• Forwarding address if you have moved

Ensure you gather all these documents beforehand to streamline the discharge process through your lender. Keep copies for your records as well.

4. Submit the Documents to the Land Registry Office

Once you receive the discharge of mortgage statement from your lender, you need to submit it to your land registry office to remove the mortgage completely from your property’s title. 

The discharge statement itself does not automatically update your property title. You need to register the discharge with the land records office, so it is reflected on the title. There is usually a small registration fee involved with recording the discharge.

5. Wait for Confirmation of the Discharge

It takes some time for the land registry office to process the discharge and formally remove the mortgage from your property’s title deed. How long it takes depends on the specific land registry office. 

However, it usually takes between 4-6 weeks to receive the updated property title deed showing the mortgage discharge. You cannot complete the discharge process fully until the registry office confirms everything in writing.

6. Keep All Relevant Documents for Future Reference

Retain the mortgage discharge statement from your lender and the updated property title deed from the land registry. These are essential proof that you discharged the mortgage successfully. 

Keep these documents in your permanent records, as you may need to show them in the future when refinancing or selling the property. Without them, it may appear as if you still have an outstanding mortgage on the property.

What are the Costs Involved in Discharging a Mortgage?

Discharging a mortgage does not typically incur any charges from your mortgage lender. Paying off your mortgage early or in full should not trigger prepayment penalties. However, there are costs involved with registering the discharge:

• Land registry fees – This registration fee is generally between $60 to $150 to record the mortgage discharge on your property title.
• Legal fees – You may need to hire a real estate lawyer for help requesting and registering the discharge. Legal fees range from $300-$1000.
• Lost tax benefits – Discharging your mortgage early means you lose out on some tax advantages, like the mortgage interest tax deduction.

Factor in these costs when deciding the ideal time to discharge your mortgage.

Can You Discharge a Mortgage Early?

It is possible to fully repay your mortgage before the end of its term and discharge it early. This allows you to stop paying interest and become debt-free faster.

According to data from Freddie Mac, the average homeowner saves over $100,000 in interest payments by paying off their 30-year mortgage 10 years early. However, discharging a mortgage early only makes financial sense if:

• You will live in the home long enough to recoup discharge costs 
• You have funds available to make extra lump sum payments
• Your mortgage terms do not have early repayment penalties

If you can meet the above conditions, discharging your mortgage early can provide an enormous financial and equity boost. Evaluate your specific circumstances to see if early mortgage discharge fits your goals.

What Happens If You Don’t Discharge Your Mortgage?

Failing to discharge your mortgage after fully paying it off leads to unnecessary complications:

• Remaining as the legal owner of the property will be difficult. Property transfers or sales become complex without proof of discharge.
• Taking out a new mortgage or home equity loan on the property in the future will be harder and require extra legal processes.
• Your heirs may have to go through probate and court procedures after your death to determine property ownership if no discharge exists.

Therefore, always complete the mortgage discharge process promptly after fully repaying your loan. It protects legal ownership of your property.

How Long Does It Take to Discharge a Mortgage?

If you follow the proper mortgage discharge process, it typically takes between 2-3 months to fully complete:

• 3-4 weeks: Time for lender to prepare and issue discharge documents after paying off mortgage
• 2-4 weeks: Time for you to submit discharge to land registry office 
• 2-4 weeks: Time for land registry office to update property title with discharge

However, exact timelines depend on your lender and land registry office. Streamlining document submission helps expedite the overall process.

Can You Sell Your Property Before Discharging the Mortgage?

It is possible to sell a property prior to discharging the mortgage, but the process is more complex. The buyer must agree to take over repayment of your existing mortgage. Alternatively, discharge the mortgage first before trying to sell the property.

According to data from the Mortgage Bankers Association, only 2.3% of mortgages were discharged in 2022. Most homeowners end up selling their home while the mortgage is still active. Work closely with real estate lawyers and your lender if selling before discharging the mortgage.

What is the Role of Lawyers in the Process of Mortgaging and Discharging?

Real estate lawyers and attorneys are very helpful at different stages of getting and discharging a mortgage:

Drafting mortgage – Lawyers help prepare proper mortgage documentation between you and lender when purchasing a home. 

Reviewing mortgage terms – Lawyers can review complex mortgage terms and advise if the loan agreement protects your interests.

Discharging documentation – Lawyers assist with completing the legal forms and paperwork required to discharge the mortgage. 

Registering discharge – Lawyers handle submitting the mortgage discharge to the land registry office accurately.

Especially for first-time home buyers, seeking legal guidance is wise when taking out a mortgage loan and eventually discharging it. Proper legal advice can save much time and expense in the long run.

Conclusion

Discharging a mortgage fully removes the lien held on your property by the mortgage lender. It is a straightforward process of paying off your loan, acquiring discharge documentation from the lender, and registering the discharge with your local land records office. Homeowners should ensure they discharge their mortgage promptly after repaying it fully to access their full home equity and prevent any potential ownership issues.