How to discharge your mortgage: What happens when you’ve paid off your home loan

Your mortgage can end for a few reasons – when you’ve paid it off in full, you’re refinancing to a new lender or you sell your property.

In each of these cases, you’ll need to discharge your mortgage. In this guide, we’ll be examining what it means, how to do it, and what costs are involved in closing your mortgage.

When you discharge a mortgage, you are removing a home loan from the title of your property.

You’ll need to go through this process if you bought your property with a home loan, because your lender’s name is on the title of your property until the mortgage is fully repaid or refinanced, or the property is sold to a new owner.

Discharging a mortgage is not to be confused with home loan settlement, which is when you first acquire the property, contracts are signed and the seller passes ownership on to you.

Here are a few instances where you’ll need to discharge your mortgage.

You’ve paid off your home loan in full

Once you’ve paid off your home loan in full, your lender will need to remove itself from your property’s Certificate of Title and discharge the mortgage. You’ll then need to register the updated Certificate of Title with your state or territory’s relevant land titles office.

You’re selling your home

You can sell your home while it has a mortgage, though you’ll need to discharge the mortgage before the sale can be finalised. This will remove your lender’s name (and your own) from the title of property so the new owner can register theirs.

Once your home has been sold, the proceeds from the sale will be used to pay off the remainder of your home loan. You also have the option of moving your current mortgage over to your new home – this is called a substitution of security.

You’re refinancing with a different home loan lender

Refinancing your home loan with a different lender will also require you to discharge your current mortgage, as the new lender and mortgage will need to be on your property’s title.

Discharging your mortgage isn’t complicated in practice, it just takes a bit of planning and paperwork. Here is the basic process of how to discharge a mortgage.

Notify your lender

First, let your current lender know you plan to discharge your mortgage. Your lender will usually ask you to complete a discharge authority form, which releases the mortgage from the property which is currently acting as security for your home loan.

It’s also a good time to ask questions if you’re unclear, such as how much it costs to discharge the mortgage and how long the discharge process will take. It can take between 10-15 business days to process a mortgage discharge, though some lenders may take longer.

Fill out and submit discharge authority form

The details and paperwork required will vary between lenders, but you’ll generally need to fill out a discharge authority form with the following information:

• Names of everyone on the home loan (including guarantors if applicable).
• Your property details, including address and Certificate of Title.
• Your home loan account number(s), including offset accounts or redraw facilities.
• Transaction account details (to pay any relevant discharge fees or receive excess funds if applicable).
• Contact details for your mortgage broker, conveyancer or any other financial institution that helped you take out the initial home loan.
• Reason for the mortgage discharge.
• Contract of sale (if property is sold).

Once complete, both you and your lender will need to sign the form.

Register the discharge and Certificate of Title

Your lender will review your discharge authority form after you’ve submitted it, and if everything is correct, it will prepare a discharge mortgage document.

The discharge mortgage document must be registered with your state or territory’s land titles office – usually the lender can do this for you, or you may be required to do it.

Once the land titles office approves the mortgage discharge, your home loan will be removed from the title of the property. Now you can refinance, sell or enjoy the home you officially own.

Mortgage discharge fees vary between lenders, with costs ranging from $0 up to $696† among the banks and lenders we track in the Mozo database. According to our data, a mortgage discharge will cost you $325† on average.

It’s a relatively minor cost in comparison to mortgage repayments and stamp duty, but discharge fees are still worth considering when comparing home loans. You can find what fees apply to your home loan by looking at the product disclosure statement (PDS) and target market determinations (TMD) on your lender’s website.

Other fees you may encounter include administrative fees from your state or territory’s government for updating the title of your property.

If you’re discharging your mortgage because you’re switching to a new lender, there can also be additional costs to refinance a home loan. For example, if you have a fixed rate home loan and the term hasn’t ended yet, you’ll likely need to pay a fixed rate break fee.

† Source: mozo.com.au as of 7 August 2024, all discharge fees for all home loans.