When you hear the word discharge, there are many things that could come to mind. And not all of them pleasant!
So when it comes to mortgages, what is a discharge of mortgage?
Is it a good thing? A bad thing? What exactly does this term mean?
Below you’ll learn what this is and some key things to know about a discharge of mortgage.
What Is a Discharge Of Mortgage?
A “Discharge of Mortgage” is a document that shows that you no longer owe any payments on your home loan. Discharge of Mortgage is also known by another term, “satisfaction of mortgage.”
There are 3 common situations where you may get a Discharge of Mortgage.
This can happen if you pay off your mortgage completely. You can also get one if you refinance your mortgage.
The discharge can also come into play if you file for bankruptcy. Here it means that you don’t owe any more payments on your mortgage.
The Discharge of Mortgage cannot be faxed or emailed. Thus, you must provide the original copy of it to the registry of deeds.
When You Pay Off Your Loan
Once you pay off your mortgage completely (this includes the principal, interest and any fees), your mortgage will be discharged by your mortgage company. This is the point at which you truly become the owner of your home. The discharge documents formalize the transfer of the home from your lender to you.
When this happens, the lender will release the lien they have on your property, cancel your mortgage note and then send you the deed for your home.
Discharge a Mortgage Due To Refinancing
When you refinance, you pay off your old mortgage with the money from the new loan. At this point your old mortgage is discharged. When this happens, the mortgage not is cancelled and the lien the old mortgage company has on your property is released.
Your new mortgage company will create a new mortgage note for you at this point. They will then place a lien on your property in order to secure the loan.
Bankruptcy and Discharging a Mortgage
This situation is a bit more complex than the other two. When you file for bankruptcy and the court discharges your mortgage, you will not have to make any more mortgage payments. And the mortgage company can’t come after you for any money you owe them.
However, when this happens you’ll have to give your property to the mortgage company. You’ll have to sign a documentation of surrender for the home, give the mortgage company the keys and leave the home. The mortgage company will then foreclose on the home and remove your name from the title.
How To Discharge a Mortgage
Depending on the situation, either your mortgage company, an attorney or the court will walk you through this process. However, the steps usually go like this:
First, you have to let your mortgage company know, in writing, that you plan to discharge the mortgage.
Then you’ll have to fill out a discharge form and send it to your lender. Next, they’ll provide you with a discharge of mortgage. They will also prepare a certification document that shows that the process/settlement is complete.