Guide to discharging a mortgage in Australia

There are a few reasons your home loan may come to an end – such as when you pay it off in full, sell the property, or refinance – but there’s one more step you’ll need to take: discharging the mortgage.

You may dream of the day you’re mortgage-free but there’s a bit more to it than simply paying off your loan. To terminate your home loan, you’ll also need to officially discharge your mortgage. Understanding what’s involved with the process can save you a lot of time, effort, and money.

What does it mean to discharge a mortgage?

Mortgage discharge or mortgage release sees a bank or lender removed from the title of a property once the loan has been paid off, it’s been refinanced to another lender, or the mortgaged property is sold. After a mortgage is discharged, the lender will no longer have a claim over the property.

Discharging a mortgage involves you or your lender making contact with your state or territory’s land titles office, which manages property titles. 

When do I need to discharge a mortgage?

In simple terms, you’ll need to ensure your mortgage is discharged each time you terminate a home loan. This can be when:

1. You’ve repaid your home loan in full

Arguably the best reason – but paying out your home loan does not mean that the mortgage on your property is automatically discharged. A mortgage discharge needs to be filed and recorded at your state or territory’s land titles office to legally release your lender from the title of your property.

2. You want to sell your property

If you plan on selling your home and you hold a home loan, it’s important to make sure that your mortgage has been discharged during the settlement process to avoid delays. Any existing home loan will be registered on the property title as an encumbrance, limiting your ability to transfer the title of the property to a new owner.

See also: 11 mistakes to avoid when selling your home

3. You are refinancing your loan with your bank or another lender

If you refinance your home loan, you are essentially terminating one home loan and beginning another. Apart from a discharge cost, there may be other fees involved. You’ll likely also need to discharge your mortgage if you are breaking a loan within a fixed term period, even if you remain with the same lender.

If you’re looking to refinance, you may want to check the home loans on the table below which features some of the lowest interest rates on the market.

4. You want to remove a guarantor from your home loan

If you want to release a guarantor from your home loan, this also requires a mortgage discharge as you’ll be ending the conditions of your old home loan and essentially be issued with a new one.

5. You want to swap your home loans to a new property

Home loan portability, sometimes called a security swap, allows you keep your existing home loan when you buy a new property. Some borrowers do this to avoid the costs associated with taking out an entirely new loan, especially when there may be break costs involved due to a fixed rate period. If your lender approves you keeping your loan for a new home, it will still need to do the paperwork to be removed from the old property’s title and appear on the new property’s title.

What are the steps involved in discharging your mortgage?

While failing to properly discharge your mortgage can have costly consequences, the process is fairly simple. Here are the steps you need to take when releasing your mortgage:

1. Contact your lender

The first step is to talk to your lender to discuss your intention. The lender should then ask you to fill out a discharge authority form, which you can often access on its website, to begin the process.

2. Finish the paperwork

In filling out the discharge form, you may need to provide the following information:

• Details of all borrowers (including guarantors), properties, and home loan account numbers

• Details of any authorised representatives for the discharge, including your solicitor, broker, and other lender

• New lender (if applicable)

• Bank state branch (BSB) and account numbers where you want refund or excess funds to be paid, or any fees or government charges to be debited

It’s best that you complete and submit the discharge form as soon as possible, particularly if you’re selling your property, as processing can take between 10 and 21 business days. Sellers may also be required to provide the contract of sale.

After you’ve submitted the required form and any other documents, it’s wise to follow up with your lender to see whether the information you’ve supplied is in order so the discharge can progress.

3. Register the mortgage release

Once you have submitted the discharge authority form and any other documentation required, your lender will prepare the discharge of mortgage document. This must be registered at your state or territory’s land titles office, either by your lender or yourself.

Should you decide to register the document on your own, it’s best you check how the process will work through your state or territory’s land titles office website.

Digital property exchange platform PEXA also provides Discharge of Mortgage assistance for NSW, Victoria, WA, SA, ACT, and Tasmania.

How much does discharging a mortgage cost?

Lenders can charge anywhere between $160 and $700 to discharge a mortgage, and then there will be standard state or territory government fees on top.

The big four banks typically charge between $160 and $350 to discharge a mortgage while government fees can vary. Most states and territories will charge a flat fee for a standard mortgage discharge (between $132 and $232 at last revision in July 2024) although in Queensland, fees are multiplied according to the number of people whose names appear on the mortgage.

If you’re refinancing your loan with the same lender, you may be able to negotiate with them to waive the lender’s discharge fees on your old mortgage. It’s always worth asking. But you likely won’t be able to get out of paying the government fees.

_{Image by Polina via Pexels}