When taking out a mortgage, you will be given the option of releasing the mortgage or satisfying the mortgage. What's the difference? Which is better for you?
In this personal finance guide, we will take a look at both options and compare them so that you can make an informed decision about which is best for your needs.
Release of Mortgage Vs Satisfaction of Mortgage Table of Contents
What is a Release of Mortgage?
A Release of Mortgage is a document that is signed by the borrower and lender when the mortgage loan has been paid in full. This document releases the borrower from their obligation to repay the loan and transfers the ownership of the property back to the borrower.
What is a Satisfaction of Mortgage?
A satisfaction of mortgage is a legal document that proves a mortgage loan has been paid in full and the property deed has been transferred back to the borrower. This document is typically signed by the lender and borrower and then recorded with the county recorder's office.
What is The Difference Between a Release of Mortgage and a Satisfaction of Mortgage?
The biggest difference between a Release of Mortgage and a Satisfaction of Mortgage is that a Release of Mortgage is a voluntary act by the borrower, while a Satisfaction of Mortgage is an involuntary act.
A Release of Mortgage essentially means that the borrower has paid off their mortgage in full and they are no longer obligated to make any payments on the property. A Satisfaction of Mortgage, on the other hand, is when the lender has foreclosed on the property and they are now the owner of the home.
What Are The Different Types of Release of Mortgage?
There are two types of release of mortgage: voluntary and involuntary.
Voluntary release of mortgage
Voluntary release of mortgage is when the homeowner pays off the entire loan amount and requests for the mortgage to be released from the property title.
Involuntary release of mortgage
Involuntary release of mortgage, on the other hand, happens when the lender decides to release the mortgage without the borrower’s request. This usually happens when the lender forecloses on the property or sells it through a short sale.
What Are The Different Types of Satisfaction of Mortgage?
There are generally two types of satisfaction of mortgage: full and partial.
Full satisfaction of mortgage
Full satisfaction of mortgage is when the entire loan amount has been paid off and the borrower is no longer liable for any payments.
Partial satisfaction of mortgage
Partial satisfaction of mortgage, on the other hand, is when only a portion of the loan has been paid off. The borrower is still liable for the remaining payments on the loan.
What Are The Advantages of a Release of Mortgage?
One of the main advantages of a release of mortgage is that it allows the borrower to keep their home as collateral for the loan. This means that if they default on the loan, they will not lose their home.
Another advantage of a release of mortgage is that it can help to improve the borrower's credit score. This is because when a mortgage is released, it is removed from the borrower's credit report. This can help to improve the borrower's credit score over time.
What Are The Advantages of a Satisfaction of Mortgage?
There are a few advantages of choosing a satisfaction of mortgage over a release of mortgage.
One advantage is that it can help to improve your credit score. A satisfaction of mortgage also stays on your public record for at least ten years, which can be beneficial if you plan on selling your home in the future.
Lastly, having a satisfaction of mortgage can provide some peace of mind, knowing that your home is completely paid off.
What Are The Disadvantages of Release of Mortgage?
When you opt for a release of mortgage, there are a few disadvantages to be aware of.
Firstly, if you have any outstanding debt on the property at the time of sale, the new owners will be responsible for paying this off.
Secondly, if the property is sold at a later date, the new owners will not be able to get a mortgage on the property unless they pay off the remaining debt.
Finally, if you have a joint mortgage, both parties will need to agree to the release of mortgage before it can be processed.
What Are The Disadvantages of Satisfaction of Mortgage?
The disadvantages of satisfaction of mortgage are that it can be more expensive and time-consuming than release of mortgage.
Additionally, if the property is sold before the satisfaction of mortgage is complete, the new owner will still be responsible for paying off the outstanding balance.
Finally, satisfaction of mortgage does not provide any legal protection from creditors in the event that the borrower defaults on the loan.
So, Which One Should You Use?
If you're not sure which one to use, Release of Mortgage is probably the way to go. It's a bit more expensive than Satisfaction of Mortgage, but it offers more protection and peace of mind. Plus, if you ever need to refinance your home, releasing your mortgage will be much easier than trying to satisfy it.
What Are Some Alternatives to Using a Release of Mortgage or a Satisfaction of Mortgage?
If you're not interested in either a release of mortgage or satisfaction of mortgage, there are a few other options available to you. You could try refinancing your mortgage, which would get you a new loan with new terms.
Alternatively, you could try to negotiate with your lender directly to see if they're willing to work with you on different terms.
Finally, you could always just sell your property outright and use the proceeds to pay off your mortgage.
Each of these options has its own set of pros and cons, so it's important to weigh all of your options before making a decision.
What Are Some Tips For Using a Release of Mortgage?
If you're considering using a release of mortgage, there are a few things to keep in mind. First and foremost, make sure that you're comfortable with the terms of the agreement. You should also be sure to get everything in writing, so that there's no confusion later on.
Another important tip is to communicate with your lender. Be sure to let them know your plans, so that they can work with you to ensure that everything goes smoothly.
Finally, remember that a release of mortgage is a legal document. This means that you'll need to have it properly notarized before it's valid. Once everything is in order, you'll be able to move forward with your release of mortgage and enjoy the benefits it can provide.
What Are Some Tips For Using a Satisfaction of Mortgage?
If you're considering using a satisfaction of mortgage, there are a few things to keep in mind.
First and foremost, make sure that the language in the document is clear and concise. You don't want there to be any confusion about what's being agreed to.
Secondly, be sure to have all of the relevant parties sign off on the document. This includes the borrower, the lender, and any witnesses.
Finally, make sure that the satisfaction of mortgage is properly filed with the county recorder's office.