When you (finally) ditch your mortgage, your lender issues you a deed of reconveyance, confirming that they relinquish you from your debt. Reconveyance is the process of removing the lender’s lien on the title of the property once the borrower (the homeowner) has paid the loan in full.
Whether you’re paying off your mortgage with home sale proceeds or other available funds, reconveyance is an essential step to cut ties with your lender. If you fail to complete reconveyance and recording, your mortgage remains as a lien on your property, impeding the title transfer to your buyer. According to a 2021 survey conducted by the National Association of Realtors®, title issues attributed to 13% of delayed home closings and 4% of terminated contracts.
To walk us through the ins and out of the reconveyance process, we spoke with Kenneth Bryant, a West Virginia real estate agent with more than 24 years of industry experience. He advises sellers to start the reconveyance process early in a transaction to avoid unwelcome surprises and prevent delays.
What is reconveyance, and why do you need one?
When you first bought your home, you signed a promissory note laying out your loan terms. Depending on your state law, you also signed either a mortgage or deed of trust, an agreement to use your home as collateral for the loan.
That agreement — the mortgage or deed of trust — is a legal record of the lien on your property. Your county or other local municipality’s recorder’s office retains a recorded copy of the document. If you were to stop making payments or otherwise default on the loan, that lien would give your lender the right to foreclose, and you could lose your home.
When you satisfy the terms of your promissory note and pay off your loan, your lender no longer has claims to your property. Reconveyance is the process of removing the lender’s lien from the property’s title once the borrower has paid the loan in full.
The specific reconveyance document your lender uses to process the reconveyance hinges on whether your loan is secured by a mortgage or deed of trust. According to the title support company PropLogix, common reconveyance forms include:
- Mortgage release
- Release of mortgage
- Satisfaction of mortgage
- Mortgage satisfaction
- Deed of reconveyance
- Release of trust deed
While these documents go by different names, they all serve the same purpose: to confirm the loan payoff and remove the lender’s lien on the property title.
Here’s a step by step of how reconveyance works
In issuing the loan reconveyance document, your lender acknowledges that you’ve paid off the loan. The reconveyance process differs when you pay off your home loan with home sale proceeds versus paying off the loan directly with funds you have on hand.
Reconveyance process for home sellers
The settlement agent (a third party, such as an attorney or escrow officer, who facilitates the real estate transfer) handles the bulk of the reconveyance process. It’s your responsibility to provide the settlement agent with the mortgage information. Here’s an overview of the process:
- Your settlement agent runs a title search: When you or your real estate agent opens escrow, the settlement agent conducts a title search to confirm whether any liens or title inconsistencies exist. For example, a contractor may have filed a mechanics lien after a contract dispute during your last remodel. Your settlement agent will investigate and work with you to clear up potential issues. At this stage, your lender shows up on the title as a lien; you’ll need to remove all liens before transferring the title to the new owner.
- The settlement agent obtains the payoff statement from the lender: In most cases, the settlement agent requests a payoff statement from the lender. The payoff statement details the required payoff amount, including the loan balance, interest, and fees. As the seller, you provide the loan details to the settlement agent. Your settlement agent will need your lender’s contact information, the loan number, and the loan amount.
According to Bryant, there are cases when your settlement agent may ask you to contact your lender directly for the payoff statement. In that case, contact your lender using the information on your monthly mortgage statement to request a payoff statement.
Bryant also notes that it can take up to a week to receive the payoff statement from the lender, so it’s important to start the process early. “That’s something [sellers] need to be aware of,” he says, adding that it’s best to provide loan information to the settlement agent at least a few weeks ahead of closing.
- The settlement agent records the reconveyance: During closing, the settlement agent records the necessary documents, including the reconveyance, at the local recording office. All fees associated with closing your home, including any recording and reconveyance fees charged by the settlement agent, are listed on the final settlement statement.
Reconveyance process when you pay off your mortgage before you sell
If you’re paying off your mortgage loan and don’t plan to sell anytime soon, follow up with your lender to ensure that they have recorded the reconveyance.
- Request a payoff statement: Contact your lender or loan servicing company listed on your mortgage statement and request a payoff statement. The amount listed on your mortgage statement balance isn’t the same as your payoff amount.
- Pay your outstanding mortgage: Pay the mortgage balance using your lender’s payment instructions on the payoff statement. The payoff balance changes daily to account for per diem interest charges.
- Confirm you’ve paid the mortgage in full: Confirm that your lender received the funds and the loan is paid in full. You will often receive a letter or statement confirming payoff. You can also check your updated loan balance by logging into your online account.
- Your lender processes reconveyance: The lender draws up the reconveyance. State law dictates how quickly a lender must issue a reconveyance once the loan terms are met. For example, according to West Virginia statute, the lender must furnish written release within 30 days after the debt is paid. California allows the lender 21 calendar days to issue a reconveyance document for recording after the lender receives the required documents in the jurisdiction where the Deed of Trust was originally filed.
- You or your lender handles recording: Your lender may arrange to record the reconveyance at the property records office where the deed of trust or mortgage was originally filed. On occasion, the lender sends the reconveyance directly to the borrower without recording it. If the lender signed the document and the signature is notarized, check the reconveyance for a stamp or sticker with a recording date from the local property records office. If the reconveyance doesn’t have one, you’ll need to take it to your local property records office and pay for recording to complete the process.
- Receive a recording receipt: You’ll receive the original reconveyance document in the mail after it’s been recorded.
Confirm recording to avoid title issues down the line
If the reconveyance isn’t recorded, the lien from your home loan remains on the title in your county or local municipality’s records. This inaccurate record could cause issues later when you go to sell, warns Bryant. You won’t be able to transfer the title to the new owner until you record the reconveyance.
If the lender mails you an unrecorded reconveyance and you lose it, don’t panic. Bryant says it’s correctable, but you’ll have extra legwork. “You [have] to go back and get another original … that can take a week, 10 days … to get it from the lending institution,” he says. If you’re in the middle of selling your home, the delay could affect your closing time or put a sales transaction in jeopardy.
If you aren’t sure whether the reconveyance was recorded, check with your local public records office. Many offer online search queries to look up recorded documents, or you can visit the records office in person.
Reconveyance fees vary: Here’s how costs add up
Reconveyance fees vary depending on your property records office, your lender, and your settlement agent.
If you’re selling your home and the settlement agent handles the title transfer, your settlement agent charges a reconveyance fee to your closing statement. The fee covers the cost to record the document, and the local recorder’s office dictates the amount. For example, Bryant’s local office in West Virginia charges $14 to record a reconveyance. In San Francisco, you’ll pay $75, plus $14 to $17 in recording fees.
Keep in mind that your settlement agent may charge a higher reconveyance fee to cover document preparation and post-closing tracking. For example, Equity Title of Washington charges $180 for a reconveyance and a tracking fee of $40 per lien.
Your lender may also charge a reconveyance fee or recording fee, which would show up on your loan payoff statement.
Just paying off your loan balance won’t clear the lien — you need the reconveyance, too
Paying off your loan balance is just the first step to getting rid of your mortgage. You won’t have a clear title without a reconveyance. With a reconveyance done right, you’ll avoid headaches at the eleventh hour when you’re selling or preparing to sell your home.
Header Image Source: (fizkes / ShutterStock)