Discharge of mortgage

Owners are often surprised to find that clearing a loan doesn’t, by itself, clean up the title. The mortgage was registered on the land titles register when the money was lent, and it stays recorded there until a second document takes it off. That document is the discharge of mortgage.

What a discharge actually does

A registered mortgage gives the lender a recorded interest in the land. The discharge is the lender’s formal statement that the interest has ended. Once the registry processes it, the mortgage no longer appears as an encumbrance on a title search, and the owner can sell, refinance or offer the property as security to someone new.

Language varies by state. Queensland’s registry calls it a release of mortgage, using Form 3, which also has a box for releasing only part of the security. NSW, Victoria, WA and SA use “discharge”. The result is the same.

How it happens in practice

Discharges now run almost entirely through electronic settlement platforms. NSW went fully electronic on 11 October 2021, when paper certificates of title stopped having any legal effect, so there’s no paper certificate to hand back when a loan is paid out. Other states have moved the same way for most dealings.

The sequence on a sale or refinance usually looks like this:

1. You (or your conveyancer) send the outgoing lender a signed discharge authority.
2. The lender works out a payout figure, including any fees and break costs.
3. On settlement day the new funds pay out the old loan and the discharge is lodged in the same electronic workspace.
4. The registry records it and the title updates.

The step that most often causes delays is the first one. Many lenders ask for the authority 10 to 15 business days before settlement. If you’re refinancing to meet a deadline, send it the day you decide to move.

Full and partial discharges

A full discharge removes the mortgage from every title it covers. A partial discharge releases one property while the mortgage stays on the rest. That’s common where a lender holds several titles under cross-collateralisation and the owner wants to sell one.

Expect the lender to ask for a payment towards the loan first, often the net sale proceeds, and to recheck its loan-to-value ratio on what remains.

A worked example

A Geelong engineering business owes a bank $520k, secured over two titles: the owner’s home and a small factory unit. The owner sells the factory unit for $610k.

• The bank agrees to a partial discharge of the factory title if $340k comes off the loan at settlement. It’s comfortable that the home alone covers the remaining $180k.
• The owner signs the discharge authority three weeks out. The bank issues a payout letter for the $340k reduction plus its discharge fee.
• At settlement the buyer’s funds pay the bank, the partial discharge is lodged, and the buyer takes a clean title. The mortgage stays registered over the home until the last $180k is repaid.

Had the owner left the authority until the week of settlement, the bank might not have been ready, and the buyer could have pushed the settlement date or claimed costs.

Need to refinance before the old mortgage comes off?

Discharges are where many refinances stall, especially when a business is moving away from a lender that’s unhappy to see it go. If you’re refinancing a business loan or adding a second mortgage to bridge a gap, it pays to have the new funding lined up before the payout request goes in. Sound out a refinance with us whenever you’re ready.

Moving your property-secured lending?

Tell us what’s on the title now, who the lender is and when you need settlement to happen. It’s a one-minute form, and lenders can’t see that you asked because we don’t run a credit check at this stage. Nothing gets broadcast to a list of funders either: someone here reads it, works out the realistic options and phones you. The more precise the figures, the sooner we can say what will work.

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