What is a Mortgage?

A mortgage is a security registered over property to secure a loan. If the borrower is unable to repay the loan, the lender can enforce its rights over the property and, subject to the applicable legal process, sell the property to recover the outstanding debt. (In many cases, people choose to sell the property themselves before it gets to this point.)

What does security mean?

A security is something provided by a borrower to protect the lender in case the borrower is unable to repay the loan. Depending on the type of loan, the security can be property, a person’s guarantee, or a legal right. In the case of a mortgage used to purchase real estate, the property itself is the security.

When you use a mortgage to purchase a property, the bank or other lender registers a mortgage interest on the title to the property. If the borrower defaults on the loan, the lender has legal rights to enforce the mortgage and, ultimately, sell the property to recover the money it lent.

Importantly, the mortgage does not automatically disappear from the title once the loan has been fully repaid. The mortgage must be formally discharged and removed from the title through the appropriate registration process. Until this is done, the mortgage will generally remain recorded on the title.

There may be various reasons why a borrower does not arrange for the mortgage to be discharged immediately after repaying the loan.

One benefit of leaving the mortgage registered is that it can provide an additional layer of protection against certain types of property fraud. When the property is eventually sold, the registered mortgage will need to be discharged as part of the conveyancing and settlement process. The lender will also be involved in confirming and processing the discharge of its mortgage. This means that, in addition to the real estate agent and conveyancer, the lender is involved in the transaction, which can provide an additional layer of security.

On the other hand, delaying the discharge of a mortgage can have disadvantages. Fees and administrative costs associated with dealing with the mortgage may increase over time, potentially resulting in higher costs when the mortgage is eventually discharged.

When purchasing a property with a loan, a mortgage is registered on the property title, and when the property is sold, the mortgage must be discharged and removed from the title.

Rits Conveyancing

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