Mortgage Cancellation: What is it and how to do it?

Cancel a mortgage

The Mortgage is a very popular financing modality in United States. However, not everyone has a thorough understanding of how a mortgage works . For this reason we want to share everything you need to know about mortgage cancellation. We will answer the most common questions that users ask about this process and we will teach you the steps to follow to cancel a mortgage.

Normally, through the Mortgage Law that regulates all the information regarding mortgages, we can know a lot of information on how to hire and acquire this financing service.

But what if we want to cancel it when we have just paid the monthly mortgage payments or if we get the money to finish paying it before the term? Little do they inform us of what we must do to cancel the mortgage. So keep reading to find out all the details.

What is a mortgage cancellation?

When we acquire a mortgage in a bank or in companies like Softkredit , we do it to pay for a property in installments over a long period. Many people believe that once the term expires and you no longer have to pay any more monthly payments, the financial burden ends.

Surely you ask yourself, is it mandatory to cancel the mortgage?

Once you pay the last installment of your mortgage, it is not mandatory that you do an additional procedure . However, it is recommended that you cancel the mortgage and request a simple note as proof to make it official that you no longer have debts related to your home.

The cancellation of mortgage is a fundamental step to leave a property free of charges and debts, even if you do not plan to sell it soon. Otherwise, your home will continue with the burden of the mortgage in the Property Registry, which implies that the debt will remain in force, even if the balance is zero. This can affect you when selling your home or applying for a home equity loan.

How do I cancel the mortgage?

Canceling a mortgage involves a series of procedures that you must know and perform from the moment your debt ends. Learn step by step how to process a mortgage cancellation.

Where to begin?

Get the Debt Cancellation Certificate

It is also known as a “Zero Debt Certificate”. This is the first step you must take to begin the mortgage cancellation process. Once you finish paying all the monthly installments, you must request the debt cancellation certificate from your bank for free. This document is vital to address any claim and to proceed to the next step in debt cancellation.

Request a Deed of Cancellation of the Mortgage Loan

When you acquire a mortgage, it appears in the Property Registry of your home so that, if you want to trade with said property, the interested parties can know if the property is linked to any debt . In this way, when canceling your debt, you must make sure to cancel the registration in this registry.

If you advance this process, you can sell the property easier or use it as collateral in other financing such as a new mortgage or a home equity loan. To carry out the registry cancellation of the debt, you must take the debt cancellation certificate to the notary and request a Deed of Cancellation of the Mortgage Loan that must be signed by an authorized agent of the bank.

Process the Tax on Documented Legal Acts (IAJD)

Tax on Legal Acts

Go to the Ministry of Finance or Tax Agency of the Autonomous Community to which you belong to raise the mortgage and fill out the 600 form corresponding to the Tax on Documented Legal Acts (IAJD).

You should know that this is only a formality, since since 2001 there is no tax for canceling a mortgage. This means that you will have to present the tax plus not pay any amount.

File the Deed of Cancellation of the Loan in the Property Registry

Once you have the cancellation deed and have completed the tax process, it is necessary that you take these documents to the Land Registry where your home is registered. There the cancellation of the debt will be registered so that the debt burden disappears.

At this point in the process, it is recommended to request a simple note in the registry to verify the cancellation of the mortgage . Finally, after a couple of weeks, you will have completed the process and finally your property will be free of financial obligations.

Cancel the Mortgage without Deed

It is possible to cancel the mortgage without having to go to the notary to request the cancellation deed. After 21 years of having made the last payment of the monthly mortgage payment, you can go to the Land Registry or leave the order to someone to request the cancellation of charges due to expiration.

If someone will go for you, it is necessary that they carry your notarized signature . If you decide to go personally, you will only need to bring your ID so that the officials can verify your identity. Only in some cases could they request the IAJD settlement voucher, even when it does not have to be paid.

How much does a mortgage cancellation cost?

We would think that canceling a mortgage does not entail expenses, since we are ending our debt. However, to issue certain documents and leave your property debt free you need to pay certain paperwork . These are the costs associated with each procedure to cancel a mortgage.

  • Notary : you must assume an expense before the notary to process the debt cancellation deed. This amount depends on the variable amount of the mortgage and can have a price between 90 and 240 US dollars.
  • Registration of the cancellation deed: you will have to incur another expense to register the cancellation deed and taxes in the Property Registry. This can have an approximate cost of 30 us dollars.
Steps to follow to cancel a mortgage
  • Commission for early termination: If you found a way to pay your mortgage, but the payment term has not yet expired, the company could charge a commission for it. In your mortgage contract it should be specified whether this clause exists or not. In any case, in the vast majority of cases the contracts include this commission and the amount will depend on the date on which you signed the mortgage :

    As of June 16, 2019: if your mortgage had a variable interest, the commission will be up to 0.25% of the total value of the mortgage if it is canceled during the first three years or up to 0.15% during the first five years. After this period the commission would have no cost.

    Between December 9, 2007 and June 15, 2019: if you cancel the mortgage during the first 5 years, it would be 0.5%, then 0.25% for the following. If an interest rate risk commission appears in your contract, it may cost between 0.5% and 5%.

    Before December 9, 2007: it cannot be higher than 1%.
  • Management : normally, you can do all the procedures corresponding to the cancellation of the mortgage yourself. However, if you do not have the availability, you can hire a manager and in this case, pay their fees for this work. Keep in mind that if the manager is provided by the bank where you contracted the mortgage, it is likely to be more expensive due to the collaboration agreements between the manager and the company.

Finally, you should know that once the mortgage is canceled, you can claim what you paid more in loan formalization expenses . This claim can be carried out even when more than four years have passed since the cancellation.

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