Why is there still a mortgage on my title after I have paid off the loan?

Sarah worked hard to repay her home loan and assumed that, once it was repaid, the mortgage would automatically disappear from her property title. Later, when she was preparing to sell the property, she was surprised to see the mortgage was still registered on her title.

This situation is more common than many property owners realise.

While a mortgage and a loan are closely connected, they serve different purposes. The loan is the money you have borrowed. The mortgage is the security interest registered against your title to protect the lender if the loan is not repaid.

Repaying the loan in full, does not remove the mortgage from the title. The mortgage remains registered on the title until a formal discharge of mortgage is registered at Land Information New Zealand (“LINZ”). This involves a lawyer obtaining authority from the lender and registering a discharge of mortgage electronically at LINZ. There are typically costs involved, including the lender’s discharge fee, legal fees, and registration charges.

Some property owners choose to leave the mortgage on the title. This can be helpful if they expect to borrow again from the same lender, as the existing security can be reused and the cost of registering a new mortgage avoided.  A registered mortgage can also provide an extra practical layer of protection against title fraud, providing additional oversight from the bank before a transfer of ownership can be registered.

Other owners prefer a clean title once all borrowing has been repaid or want certainty that an old security cannot be relied on for any future borrowing obligations. The right approach depends on the owner’s circumstances.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.