If you’ve ever wondered what happens to your home loan when you sell, then understanding the concept of a mortgage discharge can provide all the answers.
People sell property for all types of reasons. For some, they might want to capitalise on the current state of Victoria’s real estate market, while others, it might be a simple case of upsizing or downsizing. While buying and selling property in Australia right now can be both stressful and exciting, some things have remained unchanged, such as how the mortgage process works.
Unless you’ve owned the property for a number of years or have put some serious effort towards chipping away at your home loan, as a seller, it’s likely that you’ll still have some resemblance of a mortgage – but what happens to it in the event that you sell your property? Depending on your circumstances, you may need to apply for a mortgage discharge.
The Concept Of Mortgage Discharge Explained
While people sell homes with a mortgage attached to the property deed every day, there’s still an extra layer of paperwork that needs to be tackled if you’re the vendor in question. As such, a mortgage discharge is generally pretty self explanatory – homeowners with a mortgage tied to their name apply to be released from it.
Most of the major lending providers in Australia will need the homeowner to request and complete a discharge authority form, which essentially means the end of their home loan contract. Most lenders process a discharge request within two weeks, but some can take longer depending on a wide variety of factors. For this reason, it’s always a good idea to submit the form as early as possible so your lender can have things finalised well before the settlement date. Sellers can also give this paperwork to their solicitor or conveyancer too, as this way it’s one less thing for a seller to stress over.
Once the house or dwelling is sold and the property is transferred to the new owners, your lender will collect the money needed to pay off the mortgage balance, and register the discharge at the Land Titles office related to your state or territory.
Somewhat unsurprisingly, some fees will pop up along the way, such as the mortgage discharge fee and break costs if you happen to have a fixed interest rate loan. These are usually deducted from the proceeds of the sale, and range anywhere from a free service to around $550. Needless to say, this cost should also be factored into the other standard costs of selling a home, such as stamp duty, real estate agent fees, conveyancer or solicitor fees, and any other charges your lending institute may have in place as well.
If you want to stick to the same lender for your next property purchase, it’s smart to apply for the new home loan when you lodge the discharge form as a means to avoid any potential finance headaches further down the track. Doing this at the same time helps to streamline the process, and makes it easier for both you and the lender.
If you have a substantial amount of equity in your home and a solid and stable income, buying first could be an appropriate move. This way, the lender will take security over both your existing and new homes, so you’ll have to be in a position to make repayments on the cumulative loan balance. However, in the event that your property takes longer to sell and you don’t have enough cash to front up a new deposit, the best approach can be to wait until you find the right property, and even rent between dwellings if necessary as a means to avoid not having enough time or funds up your sleeve.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.
