After a borrower has paid the amount owed per the mortgage agreement, the lender is obligated to prepare a Satisfaction of Mortgage. From this point on, the lender no longer holds the property as security, and it must release the lien on the property.
After completed, the appropriate agency would issue a confirmation to the borrower confirming the title has been cleared, and the borrower now owns the property outright.
When a borrower pays off a mortgage in full, the financial institution (mortgagee) issues a Satisfaction of Mortgage. This document acknowledges all the terms of the mortgage agreement had been met.
Once the document is filed, the county registry is updated. The lien on the property is lifted, and the borrower is free to do what they want with the property.
Depending on your state, a Satisfaction of Mortgage may also be known as:
Mortgage Lien Release
Release of Mortgage
Any borrower would need a Satisfaction of Mortgage at the end of their term after paying off the mortgage. When there's no longer any lien on the property, the owner would be able to sell it on without condition or pledge it as collateral for personal or business borrowing.
The mortgagee must prepare, sign, and file a Satisfaction of Mortgage as soon as the mortgage is paid off. If the original lender sells the mortgage loan to another financial institution, it will fall on the new owner of the loan to issue that Satisfaction of Mortgage.
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The mortgagee must record a Satisfaction of Mortgage within a predetermined time frame upon the final mortgage payment. The lender and its legal counsel must issue a signed document to the borrower. If multiple parties are involved in the mortgage, it could take up to a few weeks to prepare the final document.
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To create a Satisfaction of Mortgage, you must provide:
Details of the mortgage owner: The name of the financial institution that holds the mortgage.
Details of the payee: The name of the borrower.
Total mortgage amount: The amount specified in the mortgage agreement and any additional costs that may have occurred throughout the term.
Date of mortgage execution: The date on which all relevant parties signed the mortgage agreement.
Full description of the property: Including the legal description and tax parcel number.
Acknowledgment that all mortgage payments were made in full: The lender's recognition that all mortgage repayments were received agreed upon in the original agreement.
Acknowledgment releasing the lender from issuing a lien on the property: Prevents the lender from filing any future lien against the property.
Date signed and signatures of all involved parties: If there are multiple parties involved in the mortgage, they're all obligated to sign the Satisfaction of Mortgage.
Mortgagor: An entity or individual that borrows funds to purchase a property.
Mortgagee: A financial institution or individual that lends to a mortgagor.
County Recorder's Office: The body that registers all documents related to real estate in a county in the United States.
Notary Public: A state-appointed official who authorizes and authenticates legal documents, including those used in real estate like acknowledgments, mortgages, and deeds.
Lien: The right to hold a property that belongs to the borrower until the debt is satisfied.
Tax Parcel Number: A 10-12 digit number identifying the ownership and assessed property values for taxation purposes.
Consideration: The monetary amount paid by the mortgagor to the mortgagee.
Only the mortgagee has to sign a Satisfaction of Mortgage.
This is not the same as signing the deed, which only the mortgagor has to sign. In certain states, a witness must observe the signing of the deed. Currently, this applies to Michigan, Ohio, Georgia, Arkansas, Vermont, and South Carolina.
After you receive the Satisfaction of Mortgage signed by the mortgagee and notarized, you need to file it with the County Recorder's Office. The filing procedures may vary from one state to another.
When the relevant Recorder's Office registers the document, and the registry is updated, the property's lien is considered lifted.
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